Beirut (AsiaNews) – The international conference on economic aid for Lebanon, also known as Paris III or the Lebanon donors’ conference, opens tomorrow in the French capital. It is expected to provide the embattled country grants and low-interest loans to help it manage its staggering US$ 41 billion public debt, a legacy accumulated over the years that skyrocketed since last summer’s war between Israel and Hezbollah.
The meeting, which will be chaired by French President Jacques Chirac and attended by United Nations Secretary General Ban Ki Moon, also represents an attempt by Western nations to support Lebanese Prime Minister Fuad Siniora’s beleaguered government.
“The message is very clear. First of all we want to support Lebanon, its government and Prime Minister (Fuad) Siniora,” said yesterday European Union EU External Relations Commissioner Benita Ferrero-Waldner.
For its part, the United States, which will be represented by Secretary of State Condoleezza Rice, will make a significant contribution, said State Department spokesperson Nicolas Burns.
Lebanon’s Hezbollah-led opposition has opposed the conference alleging that all it will do is make Lebanon pay its debt by contracting more debts without really jumpstarting its economy. But not every opposition politician is against the conference. Nabih Berri, leader of the Shia-based Amal movement, openly threw his support behind the conference last Friday.
Lebanon’s debt now stands at US$ 41 billion, 180 per cent of its GDP. The country needs seven billions this year and nine next year just to pay off its creditors. Debt repayment now represents 47 per cent of the government budget.
The debt has grown by leaps and bounds since the end of the 1975-1990 Civil War. In 1992 it was only 3 billion.
Should Lebanon fail to repay, it would not only lose credibility in international money markets but would also send its own financial sector in a spin since it is one of the backbones of the economy. Lebanese banks are in fact flushed with money. As of the end of 2006, Lebanese banks had US$ 57 billion in deposits. Should anything cause a capital flight the consequences could be disastrous for the whole economy.
The Siniora government has not yet stated what it expects to get from the Paris conference. Sources at the International Monetary Fund have suggested that a nine billion aid package might be in the works. This would require the Lebanese government to adopt a reform programme that would include privatising some public services like the telephone as well as retooling its tax system and social welfare.