Arabian Business Weekly Update 7th September 2004

Lebanon faces major economic challenges. The early signs are not good.

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By  Anil Bhoyrul Published  September 7, 2004

Editorial Leader|~||~||~|

Letting down Lebanon

Rafik Hariri likes to be known as “Mr. Lebanon.” The billionaire Lebanese Prime Minister is credited with rebuilding the war-torn country over the last 15 years. To many visitors, Beirut is booming and beautiful. But in recent weeks, the actions of Hariri threaten to plunge Lebanon into an economic chaos that could last the next 15 years. Hariri, in a last-minute change of heart, agreed to support the extension of President Emile Lahoud’s term in office by another three years without election. This goes against the Lebanese constitution, and makes a mockery of its democracy. Lahoud is the favoured choice of neighbouring Syria, which happens to have 20,000 troops in Lebanon. The move has prompted international outrage, and the mood at the special UN Security Council meeting suggests that UN economic sanctions could at some stage be imposed on Lebanon. This would be nothing short of disastrous for the country and its people. Over 77% of the total deposits in Lebanon are in US currency and more than 85% of the bank loans are also in dollars. In addition, many of the Lebanese banks have investments in terms of bonds and stocks in the US and Washington may freeze these assets if it sees fit. France, Saudi Arabia, UAE, Kuwait and other countries granted a soft loan of $2.5 billion to Lebanon to help the government reduce the cost of debt servicing. The cash injection helped the government and the Central Bank to reduce the interest rates on deposits and treasury bills by at least 6%, but the public debt, estimated between $33 billion to $35 billion, remains a serious problem. After publicly stating that he opposed the extension of Lahoud’s presidency (which is arguably illegal), Hariri’s turnaround makes him look weak. But does he really care about public opinion? With $5.2 billion in the bank, Hariri is the world’s fifth richest Arab. His construction business is growing, and his financial future is brighter than ever. The same can’t be said for his people. They have been let down, and badly.||**||

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