The stalemate between domestic politicalforces continues to impede reforms while the ongoing Syrianconflict is imposing a security, political, and economictoll on Lebanon. The stalemate in the executive andlegislative branches of government remains an impediment toreforms. Important bills, regulations and appointments arestill pending in cabinet and Parliament. This deadlock couldwell last until the June 2013 Parliamentary elections. TheSyrian crisis is fueling political divide among sectarianlines in Lebanon, leading to sporadic violence incidentsacross the country. These incidents have materially impactedthe economy, with sectors such as tourism strongly affected.Politically, the turmoil has sparked social unrest andovershadowed the reform drive. To tackle the situation, thegovernment devised a minimum political understanding torestore order in the country. Political backing for a largesecurity operation has also been given; results have yet tofully materialize. The fiscal deficit and public debtpositions remain major challenges for the Lebanese economy.The fiscal deficit deteriorated somewhat during the firsthalf of the year. Notwithstanding this slight widening ofthe fiscal balance, public debt continues its recentdownward trend. Rising international commodity prices andthe Syrian crisis are adding further pressure on both tradeand current account deficits.
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