SINCE the elections of 1992, the leading role on Lebanon's economic stage has been played by Prime Minister Rafrq Hariri. The extent of public confidence in his ability to turn around the country's economic fortunes was illustrated when the pound recovered 10 per cent of its value in the days immediately after his appointment in October 1992. In a mere four years, the fate of Lebanon's economy has become inextricably linked to his own.

In that time, Hariri has invested much of his personal fortune in development projects, above all the reconstruction of Beirut's commercial centre. He has further consolidated his hold by installing many of his associates at the head of government institutions. Critics say that his emphasis on the role of private investment in Lebanon's reemergence as a regional centre for financial services fails to address the uneven distribution of wealth that fuelled the civil war. However, the results of the first round of the elections reflect in part the government's success in restoring basic services to much of the population.

GDP: Government estimates confirmed by the IMF put Lebanon's gross domestic product (GDP) in 1995 at $11,400 million, almost twice the 1991 level of $5,840 million. Growth slowed to an estimated 3.5 per cent at an annualised rate in the first half of 1996, compared with 6 per cent in 1995 and 8.8 per cent in 1994. This decline has been attributed largely to a sharp drop in private investment, itself partly the result of high interest rates.

Debt/budget: Interest rates remain high as a result of the government's large domestic borrowing requirements to finance the budget deficit. The deficit has fallen slightly, but still remains high at about 15 per cent of GDP.

Critics of the government's economic polides point to the increase in Lebanon's public debt as the main burden with which the Hariri administration has saddled the country. Total public debt has more than doubled since 1993 to $8,300 million at the end of May. Debt servicing expected to cost some $1,600 million this year currently accounts for some 40 per cent of total public expenditure.

The government is now aiming to reduce the debt servicing burden and shift the emphasis to long-term foreign debt with lower interest rates. Domestic debt currently accounts for almost 85 per cent of total public debt, carrying average interest rates of 21 per cent.

There have already been bold moves in this direction, with $800 million raised by the government in Eurobond issues since late 1994. The government is now awaiting the international response to Harris request for $5,000 million in aid which he presented to the EU in June. The aid would be spread over five years, with 30 per cent in grants and the remainder consisting of soft loans.

Balance of payments: Lebanon continues to depend heavily on imports. These have doubled since 1992 to over $7,300 million in 1995. Exports remain meagre in comparison, having crept up erratically over the past four years to $824 million in 1995. However, official figures show a balance of payments surplus by taking into account net capital inflows. These include net services, transfers and capital movements of various kinds. This surplus rose to $1,170 million in 1993 before falling to $256 million in 1995. The surplus for the first half of 1996 was a mere $38.5 million.

RB