Counting on cash

Lebanon’s finance minister Jihad Azour tells Massoud A Derhally that the world must now start helping Lebanon to rebuild itself - but precise figures on what is needed are not yet clear.

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By  Massoud A. Derhally Published  August 21, 2006

|~||~||~|Q. There have been reports, citing UN estimates that the total damage to the Lebanese economy is in the realm of $24 billion; can you perhaps comment on this? A. I have no estimate and I will not give an estimate before doing a real assessment. It’s too early to tell. If you want it to be serious we have to do real work on the ground to assess the infrastructure and to determine how long it will take to repair. There is the housing issue, which is the second most important, and then there is also the damage to the economy directly. The economic impact will be subject to how and when the problem will be solved. We want to be credible whenever we give figures and we want to make sure we are not creating false expectations and we want to be taken seriously and that such a reconstruction effort is done in a professional way and not repeat the mistakes of the past. There for the time being I prefer not to throw figures. I think for the time being one should think about how you can bring back the economy to what it was prior to the war, how to reactivate the economy, how to rebuild the needed infrastructure for the flow of trade and goods around the country, what is the strategy for rebuilding the houses in order to bring back people to their home towns and villages to ensure there are basics for a prosperous economic life to take place otherwise people will not go back. The main point if how to mobilize donors and what is the strategy of the emergency recovery and reactivating the economy and the reconstruction. We should seize this opportunity in order to accelerate certain reforms, making sure some of the bottlenecks we had in the past are not there in the future. Q. Do you have a strategy in place? What does that entail? How will the reconstruction phase take place will it be through the convening of a conference? A. We have ideas but as minister of finance it is my responsibility to prepare for the finances to come through donors and our big preference is not to have it in terms of debt because the level of debt we reached is high and therefore adding new debt on top of a substantial amount may have a financial impact. Public finance is under stress because public revenues are declining or declined tremendously during this war period. Therefore we have to make sure that the reconstruction will not create additional vulnerabilities on the macroeconomic front. When it comes to the various issues of in terms of what is the strategy to rebuild bridges or reactivate the transportation sector this is something I leave it to the council for reconstruction and development. What we are working on is to reintegrate all these elements together to get to a level where we have a reconstruction programme and plan that can be presented to the donors. The Arabs have showed in creating a reconstruction front and we are working with the various ministers on that and they will be playing an important role. An addition dimension is the social and humanitarian dimension, which includes housing and the return of the displaced. This is something very important to address once the hostilities end. This is being worked on and will be integrated into the reconstruction programme. We are working with private sector representatives to see where are the critical and weak issues are and some of the laws and regulations we need to execute. Q. Will you be seeking support from the World Bank and IMF? A. The magnitude of support we can get from the IMF for a post conflict facility or quota could be half of our contribution, which is limited and would not exceed $300 million. With the World Bank it is a different ball game and the funding for the exposure on a country is not related to any quota. For the time being we are in direct contact with the EU, UN, UNDP, World Bank and Arab and Islamic funds in order to consider what is the best format. At the end of the day what is important for us is to get maximum international support. The Swedish prime minister has proposed to hold a donors conference and at the end of the day we are open to whatever support we can get. We want to make sure we are getting the support we need, the right way and it is implemented also in the right areas and sectors. We are not going to only focus on infrastructure but also take care of the security issues and this is something the international community will be asked to help Lebanon. We want to take care also of public finance and reform. It doesn’t mean that because we had this war on Lebanon that reforms have to stop, On the contrary some of them have to get accelerated, mainly the deregulation of certain sectors, allowing the private sector to operate in the energy, power sector, telecommunications. Even if assets are undervalued now it doesn’t mean that we shouldn’t have the private sector involved therefore we have to update our reform programme from to the one we had drafted prior to the war for the Beirut conference and we have to integrate the post war situation into a broader framework. Otherwise we will get to a level, to the situation we had in 1995/96 when Lebanon went into the reconstruction after the civil war without addressing some of the structural issues. When the reconstruction work ended we immediately witnessed a decline in growth in 1996/97. Of course it was coupled with other things; the extension of the mandate of the late president Elias Hrawi and the Israeli attack in April 1996. Q. Do you intend on holding the Beirut I conference? A. For the time being we haven’t reached a decision on that. It could be one it could be more than one. It depends on the initial [response] of the international community. We definitely have some meetings formal and informal during the annual meetings in Singapore. We are still in transition, hostilities are still there despite the Security Council resolution therefore we have to wait and see…until we get out of the war situation. The whole process will become much more realistic in terms of holding a conference.||**||

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