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French Version

Country emerges from 2002 stronger despite some problems, balance sheet is in the black - The Daily Star

Three summits marked the turning point for Lebanon.

The year 2002 had mixed blessings for the country’s economy as it began with warning calls about the government’s worsening finances and ended with pledges of a $12 billion to control the spiraling debt. Prime Minister Rafik Hariri managed to hold the “Paris II” donor meeting and secure $4.3 billion in soft loans to replace existing debt and fund development projects.

Following Paris II, the government convinced local banks to buy $4 billion worth of zero-interest government bonds over the next two years. Lebanon’s Central Bank, buying Treasury bills throughout 2002, also promised to shed around $4 billion in its lending portfolio to the government.

All these pledges are to be partly delivered in 2003, the year the government plans to implement an ambitious budget and start a much-anticipated sale of the two cellular phone licenses. Despite the optimism of November and December, politicians were still talking about a Cabinet reshuffle or a change of government nearly two years after the Hariri team took office. The internal skepticism was offset by an international backing to Lebanon through three events: the Arab League summit in March; Francophone summit in October and Paris II in November. Political uncertainty, however, continued to plague Hariri’s government. Even after Paris II disagreements over the future of the cellular network continued to create tensions between Hariri and President Emile Lahoud.

The standoff between Hariri, Lahoud and Speaker Nabih Berri over a number of economic issues also became sharper in 2002, prompting the Economist Intelligence Unit to singled it out as the main reasons for economic uncertainty. Hariri main achievement in 2002 was to keep the economy afloat without turning to the International Monetary Fund.

Paris II and its aftermath also improved a number of economic indicators that had not changed in two years. The pound strengthened, interest rates on T-bills fell and the balance of payments recorded surpluses for successive months after bottoming to a $1.17 billion deficit at the end of 2001.

The Central Bank also managed to retrieve gross foreign currency reserves that were chipped throughout the year by continued wrangling among the country’s top leaders. Rating agency Standard & Poor’s ended the year by upgrading Lebanon’s outlook.

Despite these improvements, the economy is unlikely to have notched up real growth, with analysts forecasting a zero to 1 percent growth. The Hariri government also scored some other points. It signed a Euro-Med agreement with Lebanon’s main trade partner, the European Union, and began World Trade Organization accession talks.

The country also managed to attract a flux of Arab tourists and investment in the wake of the Sept. 11 attacks on the US. The long-sought privatization program also began with the government handing over management of Tripoli’s water department to a French firm.

The value-added tax imposed in February earned Lebanon’s plaudits from international financial organizations and exceeded expectations. Even troubled flag carrier, Middle East Airlines, forecasted zero losses for the first time in 25 years and secured cash to buy a new fleet. Next year could bring more positive news if public finances are amended and war is avoided in Iraq.

Beirut 07-01-2003
Dania Saadi
The Daily Star

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