Lebanon PM Warns of Economic Collapse Amid Political Crisis

Sunday, August 23, 2015
By Paul Martin

By Alaa Shahine Donna Abu-Nasr
Bloomberg.com
August 23, 2015

Lebanese Prime Minister Tammam Salam said the government may be unable to pay wages next month, as protesters clashed with police for a second day over the cabinet’s inability to resolve a crisis over garbage disposal.

Lebanon’s political impasse may also prevent the government from selling bonds, affecting its credit rating, Salam told a news conference in Beirut on Sunday.

Police outside Lebanon’s seat of government in central Beirut responded with tear gas after they were pelted with Molotov cocktails, television footage showed. The perpetrators were outsiders and not part of the “You Stink” campaign that called for the demonstrations, the official National News Agency said. About 20 protesters and police were injured, LBCI TV said.
“The garbage crisis is what broke the camel’s back, but the story is much bigger than this,” Salam said. “Did you know that because of the failure to take decisions, we may not be able to pay the salaries of a large number of public sector employees?”

The inability to service the public debt through bond sales could push Lebanon’s rating down to the ranks of the “failed states,” Salam said. Lebanon is rated B- at Standard & Poor’s, six levels below investment grade.

Beset by domestic sectarian crises and regional proxy conflicts, Lebanon has been without a head of state since President Michel Suleiman’s term expired in May 2014, because lawmakers can’t agree on a successor. Parliament hasn’t convened in months and squabbles between supporters of regional Sunni and Shiite powers Saudi Arabia and Iran have impeded the cabinet’s decision-making.

Debt Sale

A Lebanese official, speaking on condition of anonymity, told Bloomberg last week that the country plans to tap international debt markets to raise $1.3 billion this year. Authorities will approach banks over the issuance next month, the official said.

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