LEBANON: CHATAH SAYS GOVERNMENT UNITED ON ECONOMIC

UNCLAS SECTION 01 OF 02 BEIRUT 001523 SENSITIVE SIPDIS DEPT FOR EU MEMBER STATES COLLECTIVE STATE FOR NEA/ELA STATE PASS USTR TREASURY FOR MNUGENT AND SBLEIWEISS USDOC FOR 4520/ITA/MAC/ONE NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT STATE PASS USAID FOR BEVER/LAUDATO/SCOTT E.O. 12958: N/A TAGS: ECON EFIN EAID PGOV LE SUBJECT: LEBANON: CHATAH SAYS GOVERNMENT UNITED ON ECONOMIC REFORM SUMMARY AND COMMENT -------------- ¶1. (SBU) During a Paris III donor briefing on October 23, Finance Minister Mohammad Chatah stressed the current government's commitment to improving the standard of living of the Lebanese people by fostering an economic climate that encourages investment, creates jobs, and supports its people through strong social services. He insisted that the government does not view itself as a transition government, and that it is cooperating across party lines to accomplish significant reforms during its short mandate. To start, he said, the cabinet would take up the 2009 budget law and a new IMF Emergency Post Conflict Assistance (EPCA) program in its next meeting October 30. Chatah's presentation provided a coherent vision of how the Lebanese state should work on behalf of its people, and could serve as a model for March 14's campaign platform for the 2009 parliamentary elections. End summary. WIDE POLITICAL SUPPORT FOR ECONOMIC REFORM -------------- ¶2. (SBU) Ambassador and Embassy officials attended Lebanon's Fifth Donor Meeting on the Implementation of the Economic and Social Reform Program on October 23 at the Grand Serail. Finance Minister Mohammad Chatah said political stability following the Doha agreement opened the door for the resumption of a national dialogue to address certain high-profile political issues, but stressed that the government was still focused on economic reform, noting it had reaffirmed the "principles of Paris III" in its ministerial statement. While he said the current international economic climate might affect the speed of reform in certain areas, he emphasized the commitment of the government to sectoral reform, liberalization of the telecom sector, and fiscal improvement as outlined in the ministerial statement. ¶3. (SBU) Chatah repeatedly stressed that the current government does not consider itself a transition or interim government, and that ministers from all political parties -- even those who disagree strongly on other national policy issues -- were coordinating efforts to accomplish reforms in the electricity, telecom, and social sectors, as well as in the fiscal realm. Speaking in Arabic for the press microphones, Chatah spoke passionately of the government commitment to improving the lives of the Lebanese people by creating an economic climate that promotes job creation and higher salaries, and by building government institutions that provide the social and economic services the people need. ECONOMIC BRIEFING: ON TRACK WITH THE IMF, ECONOMY STABLE -------------- ¶4. (U) Chatah briefed participants on his discussions at the World Bank/IMF meetings earlier this month in Washington. He said the IMF Board will approve a new EPCA Agreement with Lebanon in November 2008, giving the GOL a good framework for policy implementation, and calming investors. He also held an investors' forum where he met with investment bankers and private sector actors interested in investing in Lebanon. ¶5. (SBU) Chatah said the Lebanese economy continues to show resilience, and estimated growth to reach six percent in 2008 and five percent in 2009, which, along with fiscal responsibility, he noted, would help lower Lebanon's debt-to-GDP ratio. In addition, Chatah reiterated his previous pleas that donor countries convert assistance pledges for development projects into budgetary support for the GOL. ¶6. (SBU) While Chatah said that Lebanon would be indirectly affected by the slowdown in the Gulf region and its impact on Lebanese working or investing there, he believed the negative impact of the slowdown would be relatively small. He asserted that the banking sector remains solid, with significant growth in deposits during the international financial crisis. Despite the crisis, he noted, there has been no major turmoil in Lebanese sovereign bonds. COMMENT -------------- ¶7. (SBU) Chatah's briefing on the economy was comprehensive, but the BEIRUT 00001523 002 OF 002 most striking part of his presentation was the coherent strategy it offered for economic reform and strengthening of Lebanese government institutions, along with a passionate commitment to the people whose state has so long underserved them. His comments should serve as a template for a March 14 policy platform for the upcoming parliamentary elections. SISON