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French Version

Lebanon - International investment bank optimistic about Lebanon's future

International investment bank JP Morgan predicted that the forthcoming donor conference in Beirut will give Lebanon a strong boost in returning to economic health. "Our view is that Lebanon is likely to once again draw on its friends among international investors and bilateral creditors to seek a reprofiling of its debt through the extension of maturities," JP Morgan said in report on Lebanon.

The donor conference was rescheduled for the beginning of 2006 at the request of Prime Minister Fouad Siniora.

Siniora said earlier that he asked for the extension to give the government more time to hammer out a five-year reform plan that will be submitted to the donor states and the World Bank.

Lebanon is expected to get a commitment of new soft loans to reduce the $36 billion public debt, representing about 180 percent of the country's GDP.

In November 2002, the donor states that met in Paris pledged $4.4 billion in soft loan to Lebanon. Only $2.5 billion was actually received by the government.

The five-year plan is expected to call for privatization of all state-owned assets and reducing the size of the state apparatus. Finance Minister Jihad Azhour, however, said last week that the government is not prepared to privatize underperforming assets such as the state-run electricity company EDL, which loses $400 million per year and is not likely to be attractive to investors.

Central Bank governor Riad Salameh said Lebanon hopes to cut the budget deficit to zero percent in the next five years.

JP Morgan said Lebanon's debt service burden has reached 40 percent of Lebanon's GDP.

It added that Lebanon enjoys a highly committed buy and hold investor base from its large diaspora, partly working in the Gulf states, as well as from governments and citizens of the Gulf states who are traditional foreign direct investors in all economic sectors.

The report also said the recent $750 million Eurobond issue that closed heavily oversubscribed reflected strong faith in the Lebanese economy.

The 10-year Eurobond issue, which carried a yield of 8.5 percent, was snapped up by both Lebanese and foreign investors.

Also, the U.S.-based investment bank Merrill Lynch has recommended Lebanon's sovereign securities to its clients.

It expected that the donor meeting in Beirut will attract around $4 billion in loans that will help the government proceed in its reform plans.

JP Morgan indicated that Syria's influence in Lebanon has drastically shrunk following the passage of UN Security Council Resolution 1559 in September of 2004, which led to the withdrawal of Syrian troops from Lebanon.

"While short-term risks remain in Lebanon, we expect the development above to have positive medium term implications for the country," the report said.

Beirut,11 14 2005
Osama Habib
The Daily Star
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