Lebanon draft budget won’t deliver significant change to debt trajectory: Moody’s

Heavily indebted Lebanon unveiled a plan to bring its public finances under control in late May but faces an uphill struggle. (AP)
Updated 03 June 2019

Lebanon draft budget won’t deliver significant change to debt trajectory: Moody’s

LONDON: Lebanon’s 2019 draft budget plan to tackle its pressing fiscal situation through spending cuts, revenue increases and refinancing of T-bills will likely fail to deliver a significant shift in the country’s debt trajectory, ratings agency Moody’s said.
Heavily indebted Lebanon unveiled a plan to bring its public finances under control in late May but faces an uphill struggle to restore the investor confidence that is needed to stave off crisis.
The budget — which has been sent to parliament for debate and approval — aims to cut the fiscal deficit to 7.6% of GDP from 11.5% in 2018 and implies the primary balance will turn into a surplus of 1.7% from a deficit of around 1% of GDP.
“This adjustment is achieved primarily via spending cuts and a limited increase in revenue,” Moody’s analyst Elisa Parisi-Capone wrote in a note to clients, dated May 30.
“According to our debt projections, the implied primary balance adjustment and the previously announced interest savings from the refinancing of high interest-rate T-bills with lower interest-rate T-bills with participation of the central bank and commercial banks, remain insufficient to significantly change the debt trajectory because of the persistent interest rate — growth rate differential.”
Moody’s said its base case was that the primary surplus would stand at 1.5% of GDP in 2019 and continually increase to 3.5% of GDP by 2023. However, assuming that interest bills remained at 10-11% and limited appetite to reduce the wage bill further due to a public pushback, the fiscal deficit would remain around 7.0-7.5%, Moody’s calculated.


Japanese officials cautious on prospects for US trade deal

Updated 3 min 35 sec ago

Japanese officials cautious on prospects for US trade deal

  • A long-sought trade pact with Japan was scrapped when Donald Trump withdrew the US from a pan-Pacific trade agreement shortly after taking office in 2017
  • Trump said he preferred that Washington and Tokyo strike a bilateral deal
TOKYO: Officials in Japan appeared wary over the prospects for a trade deal with the US after President Donald Trump said he was prepared to sign a pact soon.
Japan’s chief government spokesman, Yoshihide Suga, said Tuesday that the two sides are still finalizing details after reaching a basic agreement in late August on trade in farm products, digital trade and other industries.
Suga said Trump and Prime Minister Shinzo Abe are considering signing a deal in late September when they attend the UN General Assembly in New York.
“We are accelerating the work that still remains,” he said. “But I decline to comment further because we have not reached a formal agreement.”
Trump’s notice to Congress, released by the White House on Monday, did not mention tariffs on autos and parts, long a sticking point between the two countries.
It said his administration was looking forward to collaborating with lawmakers on a deal that would result in “more fair and reciprocal trade” between the two countries.
Toshimitsu Motegi, who became foreign minister last week after negotiating the deal as economy minister, said Japan must watch carefully to prevent Washington from forcing any last-minute changes, Kyodo News agency reported.
The agricultural minister, Taku Eto, cautioned against letting down Tokyo’s guard until the final agreement is reached, it said.
A long-sought trade agreement with Japan was scrapped when Trump withdrew the US from a pan-Pacific trade agreement shortly after taking office in 2017.
Japan and the other 10 remaining members of the trade pact, the Trans-Pacific Partnership, then renegotiated their own deal without the US
Trump said he preferred that Washington and Tokyo strike a bilateral deal.
That resurrected the longtime issue of tariffs on Japanese car and auto parts exports to the US and of stiffer duties on US exports of farm and other products to Japan.