Why did Lebanon’s public debt grow during postwar reconstruction?

Following the Lebanese Civil War, Lebanon’s public debt grew significantly due to an ambitious, large-scale program of social and economic reconstruction initiated in the 1990s by Prime Minister Rafic al-Hariri.12

This reconstruction effort, aimed at reviving Beirut as a regional financial and commercial hub, relied heavily on internal borrowing through the issuance of treasury bills and the acquisition of capital through European bond markets. These financing strategies, combined with reduced tax rates intended to encourage investment, led to persistent budget deficits and an escalating public debt load.312

Furthermore, the government’s reliance on regressive indirect taxation to address budgetary shortfalls—rather than broader tax reform—limited investment in social infrastructure and exacerbated economic inequality. Over time, this accumulation of debt, coupled with political instability and corruption, contributed to a severe debt crisis that left the country with one of the highest debt-to-GDP ratios in the world by 2018.134