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Cablegate: Lebanon: Central Bank Foreign Assets Increase by Eight

VZCZCXRO6833
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0508/01 1050954
ZNR UUUUU ZZH
R 140954Z APR 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 1515
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000508

SIPDIS

SENSITIVE

SIPDIS

STATE FOR NEA/ELA
STATE PASS USTR
TREASURY FOR MNUGENT AND SBLEIWEISS
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR ABRAMS/SINGH/YERGER

E.O. 12958: N/A
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: CENTRAL BANK FOREIGN ASSETS INCREASE BY EIGHT
PERCENT IN FIRST QUARTER OF 2008 (ECONOMIC WEEK IN REVIEW, APRIL 7 -
13, 2008)


CONTENTS
--------

-- FINANCE MINISTRY RELEASES PROGRESS REPORTS ON REFORM
IMPLEMENTATION AND..
-- ...HOLDS DONOR MEETINGS IN D.C. AND BEIRUT
-- BUSINESS MONITOR INTERNATIONAL FORECASTS TWO PERCENT ANNUAL REAL
GROWTH FOR NEXT FIVE YEARS
-- CENTRAL BANK FOREIGN ASSETS INCREASE BY EIGHT PERCENT IN FIRST
QUARTER OF 2008
-- PUBLIC DEBT CONTINUES TO GO UP
-- GE INTERESTED IN POWER SECTOR PROJECTS
-- LEBANON DROPS IN CAPITAL ACCESS INDEX

CENTRAL BANK FOREIGN ASSETS INCREASE
BY EIGHT PERCENT IN FIRST QUARTER OF 2008
---------

1. (U) The Central Bank of Lebanon (CBL) balance sheet reached
$34.48 billion at the end of March 2008, compared to $32.3 billion
at the end of 2007 -- an increase of 6.7 percent. Assets in foreign
currencies increased by eight percent in the first quarter of 2008,
and reached $13.39 billion, up from $12.39 billion at the end of
2007. This increase in foreign assets is mainly attributed to the
rise in the deposits of the financial sector due to capital inflows
into the banking sector, and CBL intervention in the local market
purchasing excess dollar supply.

FINANCE MINISTRY RELEASES PROGRESS REPORTS ON REFORM IMPLEMENTATION
AND...
------------------

2. (U) The Ministry of Finance (MOF) released its Fourth (covering
the period till the end of 2007) and Fifth Progress Reports
(covering first quarter of 2008) on the implementation of the Paris
III GOL's economic and social reform program. Both reports are
posted on the MOF website (www.finance.gov.lb). The Fifth Progress
Report indicated that the GOL progressed on 44 social initiatives,
55 economic initiatives, and 41 infrastructure and privatization
initiatives. On resource mobilization, 59 percent of total pledges
($7.6 billion) were signed into agreements with the public and
private sectors.

...HOLDS DONOR MEETINGS IN D.C. AND BEIRUT
---------------

3. (U) MOF Minister Azour will discuss reform implementation and
resource mobilization with donors at the Core group meeting on April
12 in Washington, D.C., on the margins of the World Bank/IMF Spring
meetings. Subsequently, Finance Minister Azour will hold a Fourth
Donor Meeting on April 17 in Beirut to review progress achieved and
provide an update on the status of Paris III pledges. Embassy will
attend.

BUSINESS MONITOR INTERNATIONAL FORECASTS
TWO PERCENT ANNUAL REAL GROWTH FOR NEXT FIVE YEARS
--------------

4. (U) In its last business forecast for the second quarter of 2008
for the Levant regions, Business Monitor International (BMI)
considered political risk and the impact of high oil and food prices
as the main issues affecting its expectations for Lebanon. BMI
forecasted an annual real growth of two percent for the period
2008-2012, with domestic momentum, a resilient banking sector, and
huge reconstruction potential weakened by a negative political
outlook and a vague economic policy.

PUBLIC DEBT CONTINUES TO GO UP
---------

5. (U) According to statistics released b the MOF, total gross
public debt reached $42.74billion at the end of February,
reflecting a 1.7 percent increase from the end of 2007. Domestic
debt increased by 2.8 percent from the end of 2007, reaching $21.4
billion, while external debt rose by 0.6 percent from the end of
2007 and reached $21.33 billion.

GE INTERESTED IN POWER SECTOR PROJECTS
-----------

BEIRUT 00000508 002 OF 002

6. (SBU) GE Regional General Manager Jean Claude Nasr told us that
GE is interested in bidding as "equipment supplier" for the new 450
MGW power plant project in Deir Ammar (north Lebanon). He learned
from the Higher Council for Privatization (HCP) that the request for
Expression of Interest will be announced at the end of May/early
June. Nasr wants to make sure that the size of the plant does not
disadvantage GE equipment when bidding for this project. GE will
give a presentation about its technology to concerned officials in
two-three weeks in Beirut, he said. GE main competitors are Siemens
(German), Alsthom (French), Ansaldo (Italian), and MHI (Japanese).


LEBANON DROPS IN CAPITAL ACCESS INDEX
--------

7. (U) The Milken Institute ranked Lebanon 48 out of 122 countries
worldwide and 7 out of 14 countries in the MENA region on Capital
Access Index. Lebanon ranked 33rd globally and fourth regionally in
the previous survey. Lebanon also ranked 14 out of 23 Upper
Middle-Income Countries included in the survey, down from 6th place
in 2007. The index measures how well countries support economic
activity by providing businesses with access to domestic and foreign
capital.

SISON

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