wikileaks ico  Home papers ico  Cables mirror and Afghan War Diary privacy policy  Privacy
IdentifierCreatedClassificationOrigin
08BEIRUT860 2008-06-06 18:34:00 CONFIDENTIAL Embassy Beirut
Cable title:  

LEBANON: FINANCE MINISTRY SHARES POSSIBLE

Tags:   EAID EINV EAIR EFIN ELAB LE 
pdf how-to read a cable
VZCZCXRO3406
PP RUEHAG RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHLB #0860/01 1581834
ZNY CCCCC ZZH
P 061834Z JUN 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 2211
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHNO/USMISSION USNATO 2787
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHAAA/NSC WASHDC
					  C O N F I D E N T I A L SECTION 01 OF 03 BEIRUT 000860 

SIPDIS

STATE FOR NEA/ELA
EEB/FO, EEB/IFD/ODF RDEMARCELLUS
NSC FOR ABRAMS/SINGH/YERGER/GAVITO
TREASURY FOR DAS ABAUKOL, VALVO, KMATHIASEN
USAID FOR USAID/ME JBEVER, GLAUDATO AND USAID/ME/MEA RWEBB,
DMCCLOUD, ESCOTT

E.O. 12958: DECL: 06/03/2018
TAGS: EAID EINV EAIR EFIN ELAB LE
SUBJECT: LEBANON: FINANCE MINISTRY SHARES POSSIBLE
BENCHMARKS

REF: A. BEIRUT 852

B. BEIRUT 810

Classified By: CDA Michele Sison for reasons 1.4 (b) and (d)

SUMMARY:
-------



1. (C) Discussions between the GOL and the International
Monetary Fund on possible new benchmarks are proceeding
slowly. The Ministry of Finance has submitted to us a list
of possible triggers for disbursement of U.S. assistance,
some of which are already complete. The list does not
include one of our previous benchmarks: the saleof mobile
telecom companies. The new governmentthat is currently
being formed will need to agre to any benchmarks. Embassy
recommends we consider the MOF's new proposals, but delay a
decision on benchmarks until the cabinet is named and the new
government is fully functioning and we are better able to
assess what is politically achievable. End summary.

NO REAL BENCHMARK DISCUSSION
BETWEEN IMF AND GOL


--------------------------





2. (C) In meetings with the Finance Minister's advisory
staff, represented by Chris De Clercq and Roula Azour, and
with Edward Gardner, the Resident Representative of the
International Monetary Fund (IMF) in Lebanon, Econoff and
Econstaff learned about the GOL's proposed new benchmarks to
measure GOL progress on economic reforms. Discussions
between the Ministry and the IMF that began in late April
were interrupted by the politically-related violence that
erupted May 7, postponing substantive discussion on
benchmarks.



3. (C) Gardner told us that the IMF would probably not move
quickly on establishing a new Emergency Post-Conflict
Assistance (EPCA) program, although it plans to have one for
Lebanon eventually. He explained that because of IMF fiscal
policies and timing issues, there was no urgency to proceed
at this point, so the IMF was not considering near-term
benchmarks, and has not yet scheduled a meeting with the
government to continue the interrupted discussions. The
Finance Ministry team indicated that Minister Azour had some
preliminary discussions with the IMF in Washington when he
was there for the World Bank meetings, but that he had not
shared specific suggestions with the IMF.

GOL PROVIDED LIST OF
POSSIBLE TRIGGERS


--------------------------





4. (C) On June 2, De Clercq gave us a list of suggested
benchmarks, contained in paragraph 9. These are suggested as
possible replacements for the two objectives that the
government missed: setting excise rates on gasoline, which
was due for completion in September, 2007, and sale of the
majority stake in the two mobile phone companies, which was
due for completion in June, 2008. Several actions on the new
list have already been completed. We note that the GOL has
not included the sale of the mobile telephone licenses on the
new list of benchmarks. Telecom Regulatory Authority (TRA)
Chairman Kamal Shehadi has stated that if there is no
commitment to proceed with the sale of the mobile phone
companies in the near term, the TRA will proceed with the
less controversial broadband licensing program (Ref B).

POST PROPOSAL


--------------------------





5. (C) The USG must decide on new benchmarks covering the
remaining $125 million in U.S. Paris III funds yet to be
disbursed. Embassy believes we should support benchmarks
that both promote reform and are politically achievable.
Right now, Lebanon does not yet have a fully functioning
government, as cabinet formation has not occurred and the
parliament will not meet regularly until a new cabinet is
approved. At this stage, it is difficult to assess whether
any proposed benchmarks are politically achievable. We
should be in a better position to assess that after the

BEIRUT 00000860 002 OF 003


cabinet and parliament are functioning.



6. (C) Given this set of circumstances, Embassy recommends
that we delay USG decisions on any benchmarks but consider
what the MOF has proposed. There are two benchmarks included
in the MOF's new list that Embassy believes are worth
considering now. They are:

-- Completion of tender documents for Independent Power
Producer Project by July 2008; and

-- Debt Management Reform, including the publication of the
debt management strategy report for 2009, and the creation of
a high committee for debt management through issuing a
Council of Minister's degree, both expected by December 2008.



7. (C) Embassy recommends that USG delay consideration of the
previous benchmark of mobile telecom privatization, which
the MOF did not include in its new list. The caretaker
Minister of Telecommunications Marwan Hamadeh indicated that
he believes this is a bad time to discuss telecom
privatization; other GOL officials disagree (Ref A). Embassy
recommends we defer a decision until we can better assess if
this is politically achievable. We note that the mobile
telecom benchmark would not require new approval in
Washington, since it would only be a change in date.

COMMENT


--------------------------





8. (C) While we recommend delaying the USG decision on
benchmarks, we probably do not want to wait for the IMF to
develop a new EPCA, and therefore should be prepared to
identify benchmarks which will serve as realistic reform
objectives for the new GOL. End comment.

FULL TEXT OF GOL PROPOSED BENCHMARKS


--------------------------





9. (SBU) The full text of the GOL proposal is as follows:

Budget reforms
Develop 2009 Budget Circular including ceilings for line
ministries who will be responsible for preparing their 2009
budget proposals within these ceilings (Done May 2008)
Submission by the Ministry of Education a shadow three year
budget framework with performance indicators (expected July
2008)

Social sector reforms
Finalization of 2001 audited accounts for the NSSF (as a
follow-up on the EPCA action to &appoint an auditor for NSSF
accounts. Auditor to prepare an audit plan of NSSF for
2001-05) (expected June 2008)
Implementation and institutionalization of public hospitals
accreditation program (expected end of 2008)
Implementation of the Exam Management System and Question
Bank System on second round of 2008 Official Examinations
(expected September 2008)
Expanding services for the disabled under the Right and
Access Program (started in Q1 2008)

Revenue Reforms
Approval of Global Income Tax (GIT) draft law by Council of
Ministers (Done on November 15, 2007)
Launch e-registration and e-Filing: tax payers can start
filing online (We are in the testing phase and the next phase
will be rollout) (expected end 2008)
Complete the Tax Procedure Code regulations (at MoF). The law
was completed, but writing the regulations on how the law is
interpreted and implemented is underway (however the
regulation can not be presented to the Council of Ministers
until the Law is approved by Parliament) (expected end 2008)

Cash management reforms
Minister of Finance to sign a decree to begin the process of
establishing the Cash Management Department within the
Treasury Directorate (Done May 2008)
Provide an institutional structure for the cash management
through a Council of Minister's decree creating a Cash
Management Department under the Treasury Directorate and

BEIRUT 00000860 003 OF 003


assigning a team leader (expected September 2008)

Transparency
Sign MOU agreement with the Lebanese Transparency Association
(Done, Oct 25 2007)

Power Sector
Complete first draft of Generation Masterplan for Electricity
Sector (Done)
Finalize and transmit Generation Masterplan for Electricity
Sector to CDR (expected by end-2008)
Completion of tender documents for Independent Power Producer
Project (expected by end of July 2008)

Debt Management Reforms
Publish the debt management strategy report for 2009
(expected December 2008).
Create a high committee for debt management through issuing a
Council of Minister's decree (expected QIII-QIV 2008)

Transport
Establishment of the Civil Aviation Authority (expected by
end 2008)

Telecommunications

Issuance by TRA of broadband licenses to new entrants for
provision of national network and broadband access services,
including the international gateway (expected by end 2008)

SISON