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French Version

More financial help ‘is on the way’ - new soft loans expected soon (Daily Star)

Economy and Trade Ministry official Jihad Azour says Qatar and Bahrain will provide $400 million to help reduce cost of debt

A senior government official says that Qatar and Bahrain are expected to grant Lebanon about $400 million in soft loans in the coming few months as part of a pledge to reduce debt-servicing costs. “We expect these countries to fulfill their pledges soon. This will help inject more cash into the market,” Jihad Azour, a senior adviser at the Ministry of Economy and Trade, told the Daily Star on Thursday.

Lebanon has received so far about $2.3 billion in soft loans from France, Saudi Arabia, the United Arab Emirates, Kuwait, Malaysia, Oman and the Arab Monetary Fund. The donor states that met in Paris in November of last year agreed to grant Lebanon $4.4 billion in soft loans, $3.1 billion of which will be used to lower debt servicing and the rest are earmarked for development projects. Italy, Canada and Belgium have yet to meet their commitments.

Most donor states have subscribed to 15-year Treasury bills at 5 percent interest with a five-year grace period. The ministry hopes that the cash injection will allow the government reduce debt servicing by $400 million a year.

Debt servicing consumes more than 90 percent of the government’s total annual budget. With a public debt of almost $31 billion, the government of Prime Minister Rafik Hariri has drawn up plans to implement a strict fiscal policy in an attempt to steer the country out of its current recession. “We are confident that the majority of the donor states will fulfill their pledges before the end of the year,” Azour said.

He added that elections in Belgium have delayed the release of that country’s soft loans, but stressed that the money would be coming eventually. “The way the money was raised fits with our cash flow needs,” Azour said.

In addition to the $3.1 billion from Paris II, the government is expecting the Central Bank and the commercial banks to help ease debt servicing. “If we include the cash coming from Paris II, Central Bank and commercial banks we will have more than $10 billion in our hands.”

The commercial banks have agreed to use 10 percent of their deposits to buy two-year T-bills or eurobonds at zero percent interest. The Central Bank will has also lowered the yields on its vast portfolio to 4-5 percent.

The government projects a deficit of 25 percent at the end of this year, if all the measures specified in the plan presented in Paris are implemented.

Azour said work to secure the $1.3 billion earmarked for development projects is also progressing, but declined to set a date for the arrival of the funds. “This money,” he said, “will be used for social sectors and regional development.”

Beirut 05-05-2003
Osama Habib
The Daily Star

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