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Cablegate: Lebanon: Imf Mission to Discuss New Epca Program; Illegal

VZCZCXRO9495
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0572/01 1190913
ZNR UUUUU ZZH
R 280913Z APR 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 1657
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000572

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/DEMOPOLOUS

E.O. 12958: N/A
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: IMF MISSION TO DISCUSS NEW EPCA PROGRAM; ILLEGAL
CROSSINGS ON LEBANESE-SYRIAN NORTHERN BORDERS CLOSED (ECONOMIC WEEK
IN REVIEW, APRIL 21 - 27, 2008)


CONTENTS
--------
-- IMF MISSION TO DISCUSS NEW EMERGENCY POST-CONFLICT ASSISTANCE
(EPCA) PROGRAM
-- WORLD BANK MISSION IN BEIRUT MID-MAY TO CONCLUDE $75 MILLION
LOAN
-- 2008 IMF FORECAST: MODERATE GROWTH, IMPROVEMENT IN DEFICIT AND
DEBT RATIO
-- IMF FORECASTS HIGHER GROWTH IN 2009-2010
-- ILLEGAL CROSSINGS ON LEBANESE-SYRIAN NORTHERN BORDERS CLOSED
-- LEBANON'S GLOBAL RANKING ON CREDITWORTHINESS IMPROVED
-- CONSTRUCTION PERMITS UP BY 33.4 PERCENT IN FIRST QUARTER
-- HOTEL OCCUPANCY DOWN TO 35 PERCENT IN 2007
-- LEBANON MAINTAINS "PARTLY FREE" IN POLITICAL RIGHTS RATING

IMF MISSION TO DISCUSS NEW EMERGENCY
POST-CONFLICT ASSISTANCE (EPCA) PROGRAM
--------------

1. (SBU) An International Monetary Fund (IMF) delegation is expected
to arrive in Beirut on April 29 for a two-week visit to discuss a
new Emergency Post-Conflict Assistance (EPCA) program for Lebanon,
Finance Minister Jihad Azour told Charge on April 23. The mission
will discuss and negotiate with the Finance Minister and the Central
Bank Governor monitorable actions, and monetary and fiscal targets
for 2008, as well as develop a macro-economic scenario for 2008.
Charge asked Azour to share the new benchmarks with Post.

WORLD BANK MISSION IN BEIRUT MID-MAY
TO CONCLUDE $75 MILLION LOAN
---------------

2. (SBU) Azour also told us that a World Bank mission is expected in
Beirut mid-May to set up the time line to conclude the second World
Bank Development Policy Loan (DPL), amounting to $75 million.
Disbursement is conditional on the implementation of specific
actions in the social and power sectors.

2008 IMF FORECAST: MODERATE GROWTH,
IMPROVEMENT IN DEFICIT AND DEBT RATIO
--------------

3. (U) In its Emergency Post-Conflict Assistance (EPCA) report, the
IMF projected economic growth in Lebanon at about three percent in
2008, noting that the political stalemate and concerns about the
security situation weigh on the economic outlook. The fiscal
deficit is expected to improve from 11 percent of GDP in 2007 to
10.3 percent this year. With slow growth and continued fiscal
tightness, the gross public debt to GDP ratio is projected to
improve, reaching 167 percent in 2008 compared to 171 percent in
2007. The IMF expected deposit inflows to remain strong, barring
any unexpected political and security conditions.

IMF FORECASTS HIGHER GROWTH IN 2009-2010
--------------

4. (U) The IMF has recently released the first issue of its
bi-annual publication, the World Economic Outlook (WEO), which
includes economic forecasts for Lebanon. The WEO estimated real
growth to pick up to 4.5 percent in 2009, probably due to resolving
the political crisis. The WEO expects real GDP growth to remain at
a steady pace of five percent over the period 2010-2013. The WEO
estimated average inflation at 4.1 percent in 2007, 5.5 percent in
2008, four percent in 2009, and 3.9 percent in 2010.


ILLEGAL CROSSINGS ON LEBANESE-SYRIAN
NORTHERN BORDERS CLOSED
-------------

5. (U) The Common Border Force (CBF), a joint Lebanese Army, Police,
General Security, and Customs controlling the northern
Lebanese-Syrian border, began closing illegal border crossings. The
CBF erected concrete barriers to prevent smugglers from smuggling
arms and cheaper goods from Syria. Around 80 illegal border
crossings were closed, according to unconfirmed press reports. The
local population reportedly indicated it will "respond" to what it
regards as a provocation.


BEIRUT 00000572 002 OF 002


LEBANON'S GLOBAL RANKING ON CREDITWORTHINESS IMPROVED
---------

6. (U) Institutional Investor Magazine ranked Lebanon 115 worldwide
and 19 among 20 countries in the Middle East and North Africa (MENA)
region in its semi-annual survey on the creditworthiness of 174
countries published in March 2008. Lebanon's global ranking
improved six notches from the September 2007 survey and remained
unchanged on the regional level.

CONSTRUCTION PERMITS UP BY 33.4 PERCENT
IN FIRST QUARTER OF 2008
-----------

7. (U) Figures released by the Beirut and Tripoli Order of Engineers
show that construction permits totaled about 2.15 million square
meters in the first quarter of 2008, up by 33.4 percent compared to
the first quarter of 2007. This increase is attributed to the rise
in real estate and housing demand. Mount Lebanon accounted for 47.6
percent of the total construction permits, followed by Beirut with
15.6 percent, south Lebanon with 17.6 percent, north Lebanon with 15
percent, and the Biqa with 4.2 percent.

BEIRUT HOTEL OCCUPANCY
DOWN TO 35 PERCENT IN 2007
---------------

8. (U) Ernst and Young survey of the Middle East hotel sector showed
that occupancy rate at hotels in Beirut was 35 percent in 2007, down
from 50 percent in 2006. This rate was the lowest among 19 markets
in the region, as in 2006, and posted the steepest annual drop in
the region. The survey ranked Beirut's hotels as the 12th most
expensive in the region.

LEBANON MAINTAINS "PARTLY FREE"
IN POLITICAL RIGHTS RATING
---------------

9. (U) Freedom House's 2008 annual publication Freedom in the World
rated Lebanon as "partly free", unchanged from the 2007 survey,
noting that it was upgraded from "not free" to "partly free" in
2006. Lebanon was among the nine MENA countries considered "partly
free," while 12 MENA countries were considered "not free." This
publication assesses the state of political rights in 193 countries
and 15 related and disputed territories. The index appraised
individual countries based on two variables: political rights and
civil liberties, with one representing the most free and seven the
least free rating. Lebanon scored five in political rights and four
in civil liberties, just like in the 2006 survey.

SISON

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