By Rhys Jones
The cost of debt servicing in Lebanon falls by US$208 million as the country's budget deficit finally falls.
Lebanon’s budget deficit fell by 5% in the first five months of 2005 to US$1.9 billion from US$2.1 billion in the same period of 2004 due to a drop in debt servicing.
The country’s finance ministry said the cost of debt servicing, which is considered the largest spending item in the government budget, fell by US$208 million to US$605 million in the same period.
To finance the US$35 billion public debt, successive governments have resorted to Treasury bills and Eurobonds. Most of the debt bonds were purchased by local banks, increasing their debt exposure.
The Lebanese government pays nearly US$2 billion or more a year to cover the cost of the debt, adding further costs to the cash strapped Treasury. The ministry said that the government has spent US$1.3 billion until May 2005 compared to US$1.2 billion in the same period of 2003.
The primary surplus, excluding the cost of debt servicing, in the first five months of 2005 reached US$220 million compared to US$295 million in the same period of 2005, a drop of US$75 million.