Post-war funding for Lebanon raised in Paris meeting

But will it mainly go to service Lebanon’s enormous debt?

Can Lebanon be considered a good investment? Even if there are questions, apparently the major donors feel that it is politically very necessary to show support — for the present Lebanese government.

A night curfew was imposed in Beirut Thursday night, after four persons were reported killed during the day in clashes that started after student demonstrations — the third day in a row of deadly civil strife.

A deputy UN spokesperson said at UNHQ/NY on Wednesday that “We think it is important that on Lebanon, we have all agreed, several times, that all Lebanese communities need to be represented and feel represented in the Government. We continue to call on all parties to return to the table of national dialogue and work toward national reconciliation.”

The Lebanese Prime Minister and the UN Special Envoy were both blocked in Beirut by violence that broke out during a general strike called by the Lebanese opposition on Tuesday. Lebanese demonstrators have camped out in downtown Beirut for weeks, calling for improved power-sharing in the government, and many of the ministers have been living camped out in government offices for the duration.

SG BAN flattered his hosts at the Paris Conference on Thursday by speaking, at the beginning of his statement in French. “Il importe, manifestement, de procéder de toute urgence à la reconstruction physique du pays et aussi d’assurer la réconciliation nationale en vue de promouvoir la stabilité et un progrès durable.” (UN Truth translation: The important thing is to make speedy progress in the physical reconstruction of the country and to achieve national reconciliation so as to promote stability and durable progress.”)

BAN said at the donor conference that the unsustainable level of Lebanon’s debt – 180 percent of its gross national product — is a fundamental obstacle to the country’s recovery and long term development.

The Lebanese Minister of Economy, Sami Haddad, told the BBC World Service’s Newshour program the previous evening that Lebanon — with a staggering $41 billion dollar debt – had the highest debt-to-GDP ration in the world.

About half the Lebanese budget is spent on servicing this debt.

Lebanon’s Prime Minister Fouad Siniora said on the same BBC program that most of the aid that expected from the Paris meeting would go to servicing Lebanon’s debt – and the rest to “project finance”, he said, almost as an afterthought, “related to implementing some infrastructure projects”.

The New York Times reported that: ”
In many ways, the donor conference here on Thursday will serve as a snapshot of the larger proxy war between the United States — joined by its Sunni Arab allies and Europe — and Iran and Syria. Lebanon, like Iraq, is a battleground in that war, and Mr. Siniora, a Sunni Muslim, is fighting for his political survival. The Paris conference is considered central to the survival of his government. Lebanon is badly hobbled after the monthlong war between Israel and Hezbollah last summer, with Hezbollah trying to use the war to strengthen its political role, and reconstruction efforts have been burdened by the country’s $41 billion in public debt.” reported that “Saudi Arabia, the U.S. and France lead donors pledging a total of $7.6 billion in new funds to help rebuild Lebanon and lend support to Prime Minister Fouad Siniora’s government, French President Jacques Chirac said…Lebanon’s public debt equals about 180 percent of the country’s $22 billion gross domestic product. The war with Israel damaged major roads and hundreds of houses and buildings. This year’s government deficit will spike to 14 percent of GDP compared with nine percent last year, according to Economy Ministry forecasts…The World Bank will contribute more than $1 billion toward reconstruction in Lebanon in grants and loans, said World Bank President Paul Wolfowitz. The total, which could be increased over time, includes up to $275 million in lending for private businesses, and $700 million for government programs aimed at stimulating growth, he said.”

The Associated Press listed some of the pledges in a report from Paris:

UNITED STATES _ The Bush administration is seeking $770 million in new aid for Lebanon. The money must be approved by Congress and would finance long-term redevelopment and immediate rebuilding from the war between Hezbollah militants and Israel
FRANCE _ Pledged a $650 million loan at advantageous terms.

EUROPEAN UNION _ European Commission pledged $650 million in new aid and loans.

SAUDI ARABIA _ Pledged $1 billion in development funding and an additional $100 million for the Lebanese government.

GERMANY _ Contributing $134 million.

UNITED ARAB EMIRATES _ $300 million.

BRITAIN _ Announced $48 million for a U.N. refugee agency, on top of $115 million pledged over next four years.

DENMARK _ Some $3.5 million to clear mines and in other aid.

CHINA _ Contributing $4 million.

WORLD BANK _ President Paul Wolfowitz said the bank was ready to extend, through its various arms, more than $1 billion.

EUROPEAN INVESTMENT BANK _ French organizers said the bank’s contributions totaled $1.18 billion.

ISLAMIC DEVELOPMENT BANK _ Proposed $250 million.


The Washington Post reported that a substantial part of the U.S. donation would go towards bolstering security measures: “At least $464 million of the funds pledged by the United States — or more than 60 percent of the U.S. total — would be directed to military aid or security measures, according to an unidentified State Department official, quoted by news services, who briefed reporters traveling with Rice. That included $220 million in military aid to the Lebanese government for the purchase of small arms, ammunition, spare parts and other hardware; $184 million for U.N. peacekeeping forces in southern Lebanon, and $40 million for internal Lebanese security services. About $250 million in a cash reserve would be released to the Lebanese government as it met targets for financial and structural reforms that Siniora has pledged to implement to help restore fiscal stability and stimulate the economy…Among the measures the government has promised are to raise the value added tax from 10 to 12 percent, reduce state subsidies for fuel, and privatize the electricity and telecommunications industries. At a 2002 donor conference in Paris, about $4.4 billion in international assistance was pledged to Lebanon. But donors grew angry when the government did not follow through on its fiscal austerity program and privatization promises, and only about $2.5 billion ultimately was delivered. The U.S. funds, which are subject to approval by Congress, are in addition to $230 million pledged at an August conference in Stockholm and represent a significant increase in U.S. financial assistance to Lebanon, which in years past was as low as $2 million dollars a year.” The Washington Post also reported that Lebanese PM Siniora was happy with the outcome: “I’m going back really pleased with the level of financial support shown today,” Siniora said. “This is for all Lebanon and all the Lebanese.”

The French President was also pleased, according to the Agence France Press report: “M. Chirac a parlé d’un ‘résultat très positif sur les plans politique et financier’.” (UN Truth translation: Mr. Chirac spoke of a very positive result, both politically and financially”.

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