|Lebanon receives $70 million AMF soft loan to facilitate reforms
|Finance Minister hammering out plan to present at donor meeting
Lebanon received a $70 million soft loan from the Arab Monetary Fund (AMF) to support the government's financial and economic reforms. The agreement was signed by Finance Minister Jihad Azour and the president of the AMF, Jassem al-Manaai Wednesday. Manaai said the AMF loan is linked to an agreement with the Lebanese government over a program of reforms in three different areas.
These include an improvement of the management of the national debt; an expansion of the level of state revenues to increase the budget through improving the collection of revenues, widening the tax base and rationalizing expenditure; and strengthening of financial management and support of reforms. The loan will be paid over a period of four years with low interest rates, Azour said, adding, that the financial and economic reforms which were carried out in the past few months will be accelerated.
The minister and his team are hammering out a five-year plan that will be presented to the next donor meeting next year that aims to help the government reduce the $37 billion public debt.
The International Monetary Fund proposed to the government to raise the value added tax (VAT) ratio from 10 percent to 15 percent and apply more taxes on interest on deposits.
The World Bank, United States and European nations stressed that they will only help Lebanon if the government submitted an "implementable program."
The Finance Ministry said on many occasions that it no longer can afford to subsidize the cost of fuel oil purchases, urging the energy and water minister to cut spending or else it will be obliged to raise the VAT level.
Azour assured that the financial situation "improved tangibly" in the past five months, adding, that "the current critical political phase did not affect the financial and monetary situation," thanks to the financial monitoring policy which was adopted.
"The government was able to increase the primary surplus to around $300 million as well as increase revenue rates and lower deficit rates," he said.
Stressing that these signs reflected the stability of the Lebanese economy, he said important international institutions had continuously assured their "trust" in Lebanon.
As a reflection of this trust, he indicated that the World Bank approved two weeks ago a program to support Lebanon with around $700 million over a period of three years.
This is the fourth loan which Lebanon has received from the AMF bringing the total amount of loans to $116 million, according to Manaai.
Less than five months ago, Lebanon signed a contract for a loan of $45 million with the Arab Funding Trade Program, a subsidiary of the AMF.
Manaai stressed that the Arab Trade Fund Program supported 24 Lebanese banks with credit-line facilities linked to the import by the government of diesel fuel for the electricity sector. The credit line agreements amounted to $770 million, according to Manaai.
He also assured that the AMF will participate in the donors' conference which will be taking place next year.
Apart from funding, AMF also formed a staff of 217 Lebanese staff as part of its capacity-building activities, he said.
Raed El Rafei
The Daily Star