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French Version

IMF projects drop in Lebanon's GDP

World financial body says effects of war will cause 3.2 percent contraction

The International Monetary Fund (IMF) joined other agencies and organizations in projecting a drop in Lebanon's GDP after the devastating Israeli war. The IMF said the Lebanese economy is expected to contract 3.2 percent in 2006, after 1-percent growth in 2005 and 6 percent expansion in 2004. But Lebanon should see a rebound next year with the Gross Domestic Product forecast to expand by 5 percent, it added.

"In Lebanon, growth has been hampered by political uncertainty over the last year and real GDP is expected to decline substantially in 2006 as a result of the recent conflict," the world financial body said.

In contrast, the Middle East as a whole is projected to see strong economic growth of 5.8 percent in 2006 and 5.4 percent in 2007, the report said.

Lebanese Finance Minister Jihad Azour, who is in Singapore attending a World Bank and IMF conference, has estimated that GDP fell by 7 to 8 percent due to the war and eight-week blockade.

The minister and his team plan to hold meetings with senior IMF and World Bank officials to explain developments in the aftermath of the war.

The government, according to sources, will seek an interest-free loan of more than $7 billion from the United States, Britain, France and oil-rich countries to help reduce the mounting debt servicing which usually consumes more than 45 percent of the total revenues.

The month-long war that started in mid-July shattered Lebanon's economy, destroying thousands of homes as well as roads, bridges and power plants and scaring off tourists.

Donor nations earlier this month pledged $940 million in aid to help Lebanon rebuild smashed infrastructure and recover from the Israeli offensive which is estimated to have caused several billion dollars' worth of damage.

The Council for Development and Reconstruction estimated the material damage at $3.6 billion while indirect losses are close to $8 billion.

The Finance Ministry projected the budget deficit until the end of the year at $3.85 billion, which is twice the total deficit in 2005.

The government lost substantial revenues from customs duties and VAT during the eight-week blockade.

But Azour said the government will not have a problem financing the reconstruction thanks to the massive pledges from the donor states.

Informed sources said that Central Bank Governor Riad Salameh has presented a plan to Prime Minister Fouad Siniora, for the reconstruction program.

The plan calls for the creation of an independent fund to supervise all projects. It also calls for the appointment of at least two auditing firms to check the accounts of the fund and ensure transparency.

The donor states and organizations will have their own representatives on the fund's board of directors.

The creation of the fund aims to silence some the critics who claim that donations and grants will be squandered by corrupt officials, citing the examples of the Ministry of the Displaced and the Council of the South.

Beirut 15-09-2006
Osama Habib
The Daily Star

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