Lebanese Prime Minister Rafiq Hariri is to have key meetings with the World Bank and European Union this week, under French auspices, to avoid a "Turkish-style" monetary crisis, as Ankara is experiencing currency free-fall after deciding to float its currency.
Hariri will discuss "ways of reducing the burdensome servicing of (Lebanon's) public debt" the with World Bank head James Wolfensohn and EU President Romano Prodi in meetings Monday and Tuesday, February 27, according to a member of Hariri's entourage.
Lebanon's state debt stands at $25 billion—with more than a quarter in overseas debt—representing 147 percent of the country's gross domestic product (GDP). In 2000, Lebanon's economy posted negative growth for a second consecutive year. Debt servicing payments account for 44 percent of the $6.6 billion budget for 2001, and exceeds revenues. In looking for urgent help from the World Bank and EU, Hariri is banking on securing immediate loans of $3 billion at favorable interest rates.
Hariri, a billionaire entrepeneur, started his second stint as prime minister in October, having held the post from 1992 to 1998. He wants the international community to help Lebanon privatize its ailing state-owned industries, which have been plagued by corruption and bloated administration. On the eve of his visit to Paris, Hariri's government has taken steps to show it means business towards privatization. Hariri's recent manoeuvers have even earned the praise of the US ambassador to Lebanon David Sutterfield, who is also an economist.
Lebanon's cabinet Thursday approved a temporary closure of Tele Liban, the state-owned television station, which has cost the state $33 million annually. The government will lay off around 500 Tele Liban workers before reopening in May. It also moved to close the tap on a costly $40 million per year subsidy for the sugar industry and took steps towards privatising the publicly-owned electricity company which costs the state $500 million per year. Members of Hariri's entourage say Hariri does not plan to stop there.
Central to Hariri's plans is the selling off of the state-owned Middle East Airlines (MEA), which employs 4,200 people for only nine airplanes. The MEA has cost the state $450 million since 1995. The World Bank has offered to assist in privatizating MEA. Hariri also wants to trim the cost of 210,000 government employees, and cut the huge perks enjoyed by the army and security services, which account for some 40 percent of the budget.
Crucially for Hariri, he has succeeded in persuading Syria, the main powerbroker in Lebanon, to back his plan. Damascus would be among the first hit by a collapse of the Lebanese economy, which serves as an outlet for Damascus' own sluggish economy both as an economic market and a source of jobs for Syrian workers. Hariri has also obtained the backing of Lebanese President Emile Lahoud and Parliament Speaker Nabih Berri.
To bolster confidence with foreign investors, Hariri has also reprimanded the radical Shiite movement Hezbollah for engaging in raids against Israel from southern Lebanon. Hariri met with Hezbollah chief Sheikh Hassan Nasrallah in the aftermath of last week's Hezbollah raid which left one Israeli soldier dead and three others injured to offer a firm warning.
Due to growing fears of devaluation, Hariri has also worked to bolster the country's currency reserves, which stand at $2 billion. Hariri has placed his hopes for a rescue on Wolfensohn, who during a visit to Beirut last month, promised to help to Lebanon if the country lived monetarily within its means.
In effect, Lebanese banks, which cover 80 percent of public debt, no longer have enough reserves to continue lending to the government at the very moment Lebanon needs to borrrow funds to repay three Eurobond issues worth $1.2 billion, and cover the $5 billion foreign exchange cost of imports. Marwan Iskandar, an economist, said that "without exceptional revenues Lebanon is heading towards a monetary and financial meltdown." —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)