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French Version

Crisis in Beirut threatens success of Paris III - analysts

Premier expected to unveil new reform plan designed to sway donors

Prime Minister Fouad Siniora is still counting on the Paris III donor conference to rescue Lebanon from its diverse economic problems but not many economists are confident that the government will receive sufficient funds amid the deep political crisis. The premier has warned in an earlier interview with The Daily Star that Lebanon will be in trouble if Paris III is not held, underlining the importance of a cash injection to address such challenges as the public debt and reconstruction drive.

Siniora, who is surrounded by angry protesters outside the Grand Serail, is not in an enviable position. President Emile Lahoud refuses to sign any decree or proposal submitted by the Cabinet, and Speaker Nabih Berri has no intention of calling for a session to discuss any reform paper. All these factors, according to some analysts, will complicate the work of Siniora and his team.

Lebanon is looking forward to the donor conference to reduce debt servicing, seen as the largest spending item in the government's budget.

A senior government source said that Siniora plans to disclose details of the new economic reform paper to the public before leaving for Paris in January.

"The prime minister will disclose the 25-page program in a press conference soon. The paper will touch on all the important issues," the source said.

He added that the donor countries and international organizations want to examine the reform proposal before making any commitment.

A leading economist warned against raising hopes too high at this stage.

"I don't believe the donor states will pledge enough money for Lebanon if the conference is held next month. Lebanon needs to sort out its current problems before approaching the donor states," economist Louis Hobeika said.

He added that the donor countries will not turn their back on Lebanon during the conference but expressed doubt that the money the government will receive will be up to expectations.

Hobeika argued that delaying Paris III for six to seven months would be wiser.

"We can get some money to stand on our feet from some of Lebanon's friends," he told The Daily Star, "but the World Bank and the International Monetary Fund will not be inclined to support the government wholeheartedly if the economic reform plan is not comprehensive."

He also proposed the election of a new president before talking about Paris III.

An-Nahar newspaper said on Monday that Siniora will distribute the economic reform plan to all Cabinet members, including the six ministers who resigned last month.

According to the paper, the scenario aims to reduce the debt-to-GDP ratio from 195 percent to 135 percent over the next five years.

The paper will also call for the privatization of the telecoms and electricity sectors, as well as the sale of the government's share in Middle East Airlines and Intra Investment Company.

The paper calls for raising the value added tax from 10 percent to 12 percent in 2008 and 15 percent in 2010. Taxes on interest paid on bank deposits would increase from 5 percent to 7 percent in 2008.

Finance Minister Jihad Azour presented a blueprint before the outbreak of the war in July but initial reactions from both ministers and the private sector were not enthusiastic.

The public debt is expected to reach more than $41 billion at the end of 2006 and $45 billion in 2007.

Beirut 27-12-2006
Osama Habib
The Daily Star

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