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Analysis: Lebanese united in rejecting sale of state’s gold
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BEIRUT: To find consensus in Lebanon, look no further than the gold. Despite persistent paralyzing political and popular quarreling, when it comes to Lebanon’s gold reserves, valued at around $17 billion as of Aug. 19, Lebanese economists and policymakers agree they best remain untouched.

“The presence of gold is important given the current political system and the global financial and debt crises, so in my view, it is not a good idea to sell any of Lebanon’s gold,” said Dr. Simon Neaime, chair of the economics department at the American University of Beirut in an interview with the Daily Star.

In addition to historic capital inflows and record-low interest rates on sovereign debt, shaken global capital markets have been handing Lebanon a consistent rise in the value of its gold reserves, more than doubling in the past three years and quadrupling since August 2005.

Yet with a $52 billion public debt eating up half of government revenues every year and given favorable gold prices, a liquidation of the golden egg could relieve Lebanon of 31 percent of its debt, and release an estimated $1.3 billion annually in public funds for general spending.

The size of Lebanon’s financial and gold arsenal in relation to its domestic economic woes highlights the severity of the confidence crisis, especially as the country prepares to enter the oil-producing league.
Alternatively, Lebanon could theoretically channel some or all of its gold returns into badly needed infrastructure which in turn promotes economic growth. After all, although Lebanon’s gold per capita holdings are second only to Switzerland, its power, information technology, health care, and water infrastructure lag several poverty-stricken countries.

But according to Georges Nehme, economist and Antonine University professor, “the gold issue is not purely financial. You can indeed sell gold worth a couple of billion dollars and pay off some of the maturing debt, but in the absence of confidence in policymakers, the money could be wasted.”

Furthermore, Neaime points out that the country’s gold reserves were never meant to be used to pay off debt or to promote economic growth. “There is no doubt that the debt is problematic for the economy, but the gold was accumulated to increase confidence in the Lebanese pound and you can’t find a modern case where gold was used to pay off national debt,” explained Neaime.

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A version of this article appeared in the print edition of The Daily Star on August 22, 2011, on page 4.
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