| Overview |
The
1975-91 civil war seriously damaged Lebanon's economic infrastructure,
cut national output by half, and all but ended Lebanon's position
as a Middle Eastern entrepot and banking hub. Peace enabled
the central government to restore control in Beirut, begin
collecting taxes, and regain access to key port and government
facilities. Economic recovery was helped by a financially
sound banking system and resilient small- and medium-scale
manufacturers. Family remittances, banking services, manufactured
and farm exports, and international aid provided the main
sources of foreign exchange. Lebanon's economy made impressive
gains since the launch in 1993 of "Horizon 2000,"
the government's $20 billion reconstruction program. Real
GDP grew 8% in 1994, 7% in 1995, 4% in 1996 and in 1997, but
slowed to 1.2% in 1998, -1.6% in 1999, -0.6% in 2000, 0.8%
in 2001, and 1.5% in 2002. During the 1990s annual inflation
fell to almost 0% from more than 100%. Lebanon has rebuilt
much of its war-torn physical and financial infrastructure.
The government nonetheless faces serious challenges in the
economic arena. It has funded reconstruction by borrowing
heavily - mostly from domestic banks. In order to reduce the
ballooning national debt, the re-installed HARIRI government
began an economic austerity program to rein in government
expenditures, increase revenue collection, and privatize state
enterprises. The HARIRI government met with international
donors at the Paris II conference in November 2002 to seek
bilateral assistance restructuring its domestic debt at lower
rates of interest. While privatization of state-owned enterprises
had not occurred by the end of 2002, the government had successfully
avoided a currency devaluation and debt default in 2002. |
