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Lebanon's government on Tuesday unveiled economic reforms to be presented to an international donors' conference which Beirut hopes will bring financial help to an economy reeling from war damage.
Dec. 02, 2006- The reforms, to be discussed at the January 25 conference in Paris, include plans for privatisation and curbing government spending in order to boost economic growth and ease the burden of Lebanon's massive public debt.
Lebanon's Economy and Trade Minister Sami Haddad said last month the conference could be postponed or cancelled because of a political crisis which has pitted the government against the Hezbollah-led opposition.
But Prime Minister Fouad Siniora, who has the backing of Western governments including France and the United States, unveiled the reform proposals regardless, suggesting the conference could go ahead as planned.
"Without significant external support, Lebanon would again enter into a vicious cycle of rising debt, high interest rates, depressed private investment and growth that remains well below its potential," the government said in its reform paper.
External support is an integral part of the programme and is crucial for the success of the reform efforts", it said.
The government wants international financial assistance to help finance the costs of the July-August war between Lebanese Hezbollah guerrillas and Israel as well as helping to ease the country's debt interest payments.
The government has said it hopes to garner more than $4 billion (2 billion pounds) from donor countries.
Lebanon's total gross public debt was estimated to have reached $40.5 billion at the end of 2006 -- equal to 180 percent of the country's gross domestic product, the paper said.
"Lebanon hopes to receive financial assistance mainly in grants and highly concessional loans to bring down the debt-to-GDP (gross domestic product) ratio to a sustainable level," it added.
The July-August war hit the economy hard.
"Real GDP growth, which was estimated at 5-6 percent during the first half of 2006, is likely to end the year at a negative 5 percent," the paper said.
The reforms would aim to raise real growth rates to 4-5 percent a year in the next five years.
Among the proposals is telecom sector reform including "the sale of a majority stake in, or 100 percent of the mobile sector companies by the second quarter of 2007".
Proceeds from all privatisation efforts would go towards reducing the public debt.
Other proposals included higher value-added tax rates and legal changes to reduce the costs of doing business in Lebanon.
The reform paper proposed a review of public sector pay and that the government would also identify over-staffing in the public sector.
The central bank would focus its attention on maintaining price stability using only short-term monetary instruments."
"A potential reduction in interest rates -- starting with a reduction in the margin on dollar deposits -- should boost the demand for credit by the private sector," the paper added.
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