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French Version

Presidential crisis puts Beirut One donor conference on hold

Azour concerned about delays in economic reforms

The Beirut One donor conference may be one of the casualties if the current political crisis in the country does not come to an end soon, officials and economists warned on Wednesday.

"We have prepared a comprehensive economic plan for Beirut One donor conference but we were unable to discuss it in the Cabinet due to the situation," Finance Minister Jihad Azour told The Daily Star.

Economist Marwan Iskander said that the public debt will rise to $41 billion at the end of 2006 if no action is taken to end the financial crisis.

High hopes for debt relief are pinned on the Beirut One conference, which was supposed to convene in the capital early this year.

The United States, France, oil-rich Arab states and the World Bank all pledged to provide Lebanon soft loans or even grants to reduce its $38.6 billion public debt.

Sources said that the donor states may pledge more than $5 billion in soft loans to hep reduce the debt burden.

But the donor states stipulated that the government must present a viable five-year plan before making any financial commitments.

The move to oust President Emile Lahoud, a staunch Syrian supporter, has taken up much of the Parliament's attention in the past few days after the majority bloc accelerated its campaign against him.

Azour said that the interest of the country should be the priority, adding that reforms cannot be put in the shelves for ever.

"Donor states ask me if the government has discussed the economic reforms program, but regrettably some of the cabinet members boycotted the session for weeks and we were unable to approve it," Azour said.

In 2005, the public debt rose by 7.4 percent to $38.6 billion, increasing at a rate of 1.5 percent monthly.

Meanwhile total revenues fell in the first few months after the assassination of former Prime Minister Rafik Hariri, before picking up again in June of 2005

Azour stressed that there is no fear about the monetary situation but asked if Lebanon can afford to lose the opportunity to solve the budget deficit.

He declined to comment on the current showdown between Lahoud and some cabinet members.

Observers fear that the argument over whether Lahoud should preside over the Cabinet sessions will deal a severe blow to the economic reform efforts.

Azour admitted that the speaker of the parliament, Nabih Berri, refuses to discuss important proposals such as the creation of a debt management body and the approval of a law on offshore banking because of the tense political situation.

"Berri told me that these issues cannot be reviewed by the Parliament at this stage," Azour said.

He added that there is a Cabinet session on Thursday which Lahoud may preside over.

"I don't know want will happen in the session. Let's wait and see."

Bankers are not too concerned about any panic in the market because the Central Bank has more than $10 billion in foreign-currency reserves.

Central Bank Governor Riad Salameh said earlier that the balance of payments in 2005 recorded a surplus of $700 million despite the difficulties in the country.

He added that a positive political climate will definitely give a boost to reforms efforts.

The President of the Association of Banks in Lebanon, Francois Bassil, said banks are willing to help the Lebanese government provided that the Cabinet presses ahead with economic reforms.

Lebanese banks hold the bulk of the government treasury bills and Eurobonds, making them more vulnerable to a potential default.

"Banks will surely continue financing Lebanon's public debt but a very high cost," one banker said.

However, it is less likely that banks would be willing to grant a loan to the government with zero percent interest, as they did four years ago.

Over $9 billion in debt in the form of T-bills and Eurobonds will mature in 2006 alone, meaning that the government will be forced to tap Lebanese and foreign banks to finance the debt.

Beirut 28-02-2006
Osama Habib
The Daily Star

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