Hariri: Lebanon will avoid financial crisis

Published March 11th, 2001 - 02:00 GMT

The Lebanese government, with the backing of its own people and of the international community, is on the right road toward staving off financial ruin and turning the economy around, Prime Minister Rafiq Hariri has told AFP


Hariri bases his optimism mainly on the support that his recovery plan got during a meeting February 27 in Paris with the presidents of the World Bank and European Commission, James Wolfensohn and Romano Prodi, also attended by French President Jacques Chirac. 


Hariri expressed satisfaction at the €500 million ($465 million) aid agreed on that occasion and said a second meeting with leading financiers will soon be held in the French capital. “Preparations are underway for a new meeting," he said but did not want to give a date. 


The Al-Mustaqbal daily, which Hariri owns, said Thursday that the International Monetary Fund (IMF) and Germany will take part in the meeting already dubbed "Paris 2." According to Hariri, "Lebanon wants most to reduce the debt servicing which is weighing down its finances and holding back the revival of growth" of an economy which has been in trouble for nearly three years. 


The Lebanese banks carry 80 percent of public debt in Lebanese pounds and foreign currencies, which today stands at some $25 billion, or 147 percent of gross domestic product (GDP). Scarcely a third of the debt is foreign. Servicing the debt alone accounts for 44 percent of the national budget for 2001, which foresees a deficit of $3.3 billion. 


Despite reservations from experts who estimate Lebanon's financial needs for the current year at five billion dollars, Hariri believes "Lebanese banks can continue to finance the state." "Their accounts are solid, as the IMF itself observed during a recent trip to Lebanon," he said. 


Hariri also dismissed concerns over devaluing the Lebanese pound, saying "the Arab countries of the Gulf have just put slightly more than one billion US dollars in the Bank of Lebanon to help our country." 


The plan Hariri put forward in Paris is based on a rapid privatization of public services, reduction in the servicing of debt, fiscal reform and the cleaning out of an over-manned and corrupt civil service. Hariri is also planning to widen the tax take and introduce a value added tax on sales, as well as signing an association agreement this summer with the European Union (EU). 


The prime minister has already started putting his program into action, in particular by lowering customs duties and preparing to sack or redeploy employees from the public and semi-public sectors. He has also decided to scrap subsidies to the sugar industry, which will save $35 million, while the army and the police, who account for 20 percent of the budget, have decided to reduce compensation payments for departing officers. 


As many of these measures risk being unpopular, the Sunni Muslim prime minister has discussed them over the past few days with the Maronite Christian president, Emile Lahoud, and the Shiite Muslim parliament speaker, Nabih Berri. 


Hariri said he had convinced his two principal colleagues and that "after setting out the details of the plan, a firm consensus exists." "We are all in the same boat and will carry out a rescue operation together," he said. "For the first time in Lebanon, there is a clear, transparent policy. Everybody is taking part," said Hariri. 


Hariri also confirmed to AFP that his privatization program will go ahead this year, particularly in the telephone and water supply and treatment sectors. — (AFP, Beirut) 


by Nagib Khazzaka and Pascal Mallet 


© Agence France Presse 2001

© 2001 Mena Report (www.menareport.com)

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