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'Lebanese markets will not be affected by UN report on Hariri assassination'

Salameh expects gdp to be 2 percent or lower by year end

The Lebanese financial and monetary markets will not be affected by Deltev Mehlis' report on the assassination of former Prime Minister Rafik Hariri, Central Bank governor Riad Salameh said Thursday.

He also projected Lebanon's GDP to be two percent or lower at the end of 2005. "Mehlis' report will become known in the next few days.

The issuance of the report will relieve the market and I don't think there will be any implication from this report," Salameh said at a news conference.

Many Lebanese are holding their breath before the release of the report, which may accuse Syrian and Lebanese officials of masterminding the assassination of Hariri on February 14.

The Central Bank and the Finance Ministry say that they are fully prepared for any outcome of the report, stressing that the country has sufficient gross foreign currency reserves to last for a long time.

The Central Bank has amassed more than $10.5 billion in foreign currency reserves, sufficient to last the country for at least six to seven months if the Lebanese pound came under pressure.

However, Salameh said there is no need to take pre cautionary measures because the financial markets are relaxed.

He added that there is no rush on the dollar and the balance of payments improved in the last three months.

Most economic indicators such the revenues from the value added tax, customs, exports and imports fell in the first five months before picking up in June and July.

Bank deposits fell by three percent in the first four months before rising in the following months.

Bank assets stand at more than $66 billion, or three times the gross domestic product of Lebanon.

"The government manages to issue $750 million in Eurobond and this issue was oversubscribed, a clear indication that investors have strong confidence in Lebanon," Salameh said.

The Central Bank governor underlined the importance of the donor conference that will be held in Beirut in December of this year.

The donor states are expected to pledge more soft loans for Lebanon to allow the government to reduce debt servicing.

Salameh said that he will take part with the government in drafting the draft plan that will be submitted to the donors' conference.

Responding to a question, Salameh said that the Central Bank is interested in selling its shares in Intra Investment Company and the Middle East Airlines but this decision requires a political consensus and transparency.

The Central Bank controls 99 percent of MEA and a small share in Intra Investment Company. The remaining shares are held by Lebanese and Arab Gulf investors.

Salameh said that although the economic growth fell considerably this year due to the assassination of Hariri, the GDP growth may reach five percent in 2006 if the situation is back to normal.

Beirut,10 24 2005
Osama Habib
The Daily Star
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