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French Version

Businesspeople expect more of the same from new lineup - Bankers call for continuation of fiscal reforms (Daily Star)

The formation of a new government amid heightened regional tensions will probably do little to change the overall mood of Lebanon’s business community.

Bankers and businessmen alike welcomed the move by Prime Minister Rafik Hariri to form a new Cabinet but warned against any attempt to delay privatization and fiscal reforms.
Joe Sarrouh, the advisor to the chairman of Fransabank, expressed his relief that the new Cabinet may include opposition members.

“A national unity government is very crucial at this stage. The government should reflect the unity of the country,” Sarrouh said. News media said that the new Cabinet may include some figures from Christian opposition group Qornet Shehwan, which calls for a balanced Lebanese-Syrian relationship.

Sarrouh said a national unity government would send a positive signal both domestically and externally. In reference to the developments in Iraq, Sarrouh said it is important to safeguard the country from possible threats.

The US victory in Iraq has caused some concern among politicians and economists who fear that Washington may increasingly apply pressure on Lebanon and Syria because of their objection to the war.

In addition to the possible fallout of the war on Iraq, the slow-paced economic reforms and much talked about privatization was also on the minds of bankers.“The fiscal reforms and privatization should proceed normally and quickly once the government is formed,” Sarrouh said. He did not think that the new Cabinet will make any changes to the fiscal reforms.“All that the ministers need to do is implement the measures which the previous government adopted,” Sarrouh said. Other bankers said that the market remained normal despite the news of a new Cabinet.

The injection of $2.2 billion in soft loans from some of the participants in the Paris II donor conference have relaxed the markets and eased the pressure on the pound.

But most bankers and investors feel that the government was not decisive in implementing privatization, a key requirement to reduce the $31 billion public debt.

They say that time is running out in the government, adding that if privatization was not implemented this year then the country will sink into trouble. Some of these figures want the government to tone down its anti American rhetoric to avoid the wrath of the US government and Kuwait.

Sami Saliba, financial controller at the Bank of Beirut, said that what people care about is that the government stick to the Paris II agenda. He added that commercial banks did a lot to help the government tackle the fiscal deficit and that banks have used 10 percent of their total deposits to buy two year treasury bills with zero percent interest.

This step will allow the government reduce debt servicing by another $400 million a year.“These measures may affect the profitability of the banks in the years to come. We don’t mind that as long as the government pushes forward with reforms,” Saliba said. He added that the regional tension is being felt in Lebanon and that “as long as the region is tense, the risks will get higher.” Saliba added that the government cannot do anything to change the economic climate because this problem is global.

Kamal Hamdan, an economist, said that some investors who refrained from making any investment in the country may change their opinion.“There will be further relief if the prime minister includes some Christian opposition figures,” Hamdan said. He added that the government should increase the efficiency of many departments, especially education and health.“The money wasted on health and education represent 25 percent of the country’s gross domestic product,” Hamdan said.

Beirut 22-04-2003
Osama Habib
The Daily Star

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