|'Banks will lend if Cabinet delivers'
|Sector wants reform to prove state's commitment on spending cuts
The president of the Association of Banks in Lebanon (ABL) minced no words Wednesday in telling the government to put its economic house in order.
"Don't expect more loans from us if you don't come up with an effective economic reform plan and cut waste in public departments," said FranÂois Bassil, speaking at luncheon in his honor hosted by Lebanon Opportunity magazine at the Crowne Plaza Hotel.
Bassil said that corruption, nepotism and waste are still rampant in the state-owned Electricite du Liban (EDL) and the National Social Security Fund (NSSF).
Lebanese banks, with assets of more than $70 billion, have been financing Lebanon's public debt, which has now reached $40 billion.
"We will apply pressure on the government until it takes matters into its own hands," Bassil said.
Banks would still refinance the current debt, he said, but would not grant more loans until they see the government take concrete steps to tackle economic problems.
Bassil's comments came amid intense debate over the government's five-year economic draft plan, with several political parties and trade unions rejecting key aspects of the plan including tax increases.
The president of ABL said that banks are not in favor of new taxes if the government does not explain how it is going to cut waste.
According to the reform blueprint, which may be revised by the Finance Ministry, the value-added tax (VAT) would rise from 10 to 12 percent in 2006, and a 7 percent tax on interest on bank deposits would be implemented.
Finance Minister Jihad Azour has said on many occasions that he would be glad to drop all taxes if annual waste in the electricity sector could be cut by at least $500 million.
"As long as theft and corruption are taking place then I am definitely against new taxes," Bassil said, triggering enthusiastic applause.
Some of the audience members, including former Minister of Finance George Corm, said responsibility for economic problems fell equally on the government and the private sector.
Bassil reminded the crowd of the continuous problems plaguing the electricity sector, saying that all the efforts to fix the problem are doomed to fail.
"The solution of electricity is very simple. Let the private sector take over the responsibilities in the form of concessions contracts," he said.
He added that the government simply does not have any more money to spend on the electricity and NSSF.
"Up to this date, there are conspicuous contracts being awarded at the EDL."
EDL has become a stark example of the failure of all successive governments to put an end to the fraud and waste.
The Finance Ministry estimates the losses of EDL at more than $800 million a year.
Bassil said that the NSSF has similar problems.
"Most of the bills presented to the NSSF are not accurate and this is a waste," he said.
Bassil said that EDL and NSSF do not have an auditing department to check the accounts of both entities.
He added that the government should be honest with the citizens and tells them frankly that there is no more money to subsidize electricity, fuel and other products.
"If we continue like this then there will come a day where the government will not be able to pay the salaries of government staff," Bassil said.
The Daily Star