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Cablegate: Lebanon: Central Bank Foreign Currency Assets Reach Record

VZCZCXRO0898
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0921/01 1751129
ZNR UUUUU ZZH
R 231129Z JUN 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 2312
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000921

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: CENTRAL BANK FOREIGN CURRENCY ASSETS REACH RECORD
HIGH (ECONOMIC WEEK IN REVIEW, JUNE 16 - 22, 2008)

CONTENTS
--------

-- CENTRAL BANK FOREIGN CURRENCY ASSETS REACH RECORD HIGH
-- HIZBALLAH WELL UNDERWAY IN POST-JULY 2006 WAR RECONSTRUCTION
PROCESS
-- NEW START-UP FUND ESTABLISHED FOR HIGH-TECH GROWTH FIRMS
-- BEIRUT IMPROVES IN 2008 QUALITY OF LIVING SURVEY
-- GOL WANTS TO PRIVATIZE THE BEIRUT STOCK EXCHANGE
-- WORLD BANK FORECASTS 3.5 PERCENT GROWTH IN 2008

CENTRAL BANK FOREIGN CURRENCY
ASSETS REACH RECORD HIGH
--------------------

1. (U) The Central Bank of Lebanon (CBL) mid-June balance sheet
showed that CBL foreign currency assets rose by about $188.15
million from end May, reaching a record high $14.66 billion. This
is mostly attributed to increased commercial banks' deposits with
the CBL, as well as CBL intervention in the foreign exchange market
as a buyer of excess dollars.

HIZBALLAH WELL UNDERWAY IN POST-JULY 2006
WAR RECONSTRUCTION PROCESS
--------------------

2. (U) Hizballah reconstruction and development association Jihad Al
Bina has so far rehabilitated 945 buildings out of 980 buildings
that were damaged in Beirut's southern suburbs during the July 2006
war with Israel, Arab nationalist As-Safir reported on the occasion
of Jihad Al Bina's 20th anniversary. Jihad Al Bina also paid
housing compensation to over 17,500 families whose apartments were
completely demolished, as well as compensation for the
rehabilitation of approximately 120,000 housing units, while it
repaired the common parts (entrance, stairs, and roofs) in damaged
buildings, the article said.

NEW START-UP FUND ESTABLISHED
FOR HIGH-TECH GROWTH FIRMS
--------------------

3. (U) On May 30, the first technology incubator in Lebanon Berytech
launched Berytech Fund, a start-up fund targeting the Lebanese
information and communication technology (ICT) sector. With over $6
million under management, the fund aims at injecting $100,000 to
$1.2 million in selected high-tech growth firms. So far, Lebanese
banks, corporations, universities and local NGOs have invested in
the fund.

BEIRUT IMPROVES IN 2008
QUALITY OF LIVING SURVEY
---------------------

4. (U) According to Mercer Human Resource Consulting's annual
quality of life survey, Beirut ranked 171 out of 215 most desirable
cities for overall living standards, and 15 out of 21 MENA cities.
This represented a slight improvement from the 2007 survey, where
Beirut ranked 179 worldwide and 18 in the MENA region. The survey
evaluates cities on the basis of 39 quality-of-living factors
grouped in ten categories including political, economic, and
socio-cultural factors, environment, housing, recreation, health
care, education, transportation, and other public services.

GOL WANTS TO PRIVATIZE THE
BEIRUT STOCK EXCHANGE
--------------------

5. (U) Finance Minister Jihad Azour stressed that the GOL is
determined to provide a greater protection to investments and
insisted on the need to reactivate privatization. He also mentioned
that the "GOL is serious about privatizing the Beirut Stock
Exchange." Azour indicated that parliament's endorsement of
legislation submitted by the Siniora Cabinet between July 2005 and
June 2006 will impact positively economic conditions in Lebanon.
Among these proposed laws, Azour mentioned legislation on offshore
companies, insurance companies, commercial law, fiscal system, and
the modernization of capital markets. Azour was speaking to
Kuwaiti daily Awan.

WORLD BANK FORECASTS 3.5
PERCENT GROWTH IN 2008
--------------------

BEIRUT 00000921 002 OF 002

6. (U) The World Bank's recently published Global Development
Finance Report for 2008 projected a 3.5 percent growth in 2008 as a
result of the political consensus reached in Doha in May 2008. The
report forecast growth on an upward trend in the long run as
domestic conditions continue to improve, reaching 4.5 percent in
2009 and 5 percent in 2010. The report also indicated that foreign
direct investments (FDI) flows reached $1.8 billion and remittances
$5.5 billion in 2007. As a result, the current account deficit is
estimated at 5.2 percent of GDP in 2007, and is anticipated to widen
in 2008 reaching 11.4 percent of GDP, and falling slightly to 10.5
percent in 2009 and 9 percent in 2010.

SISON

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