LEBANON: LOW EXPECTATIONS FOR NEXT WTO WORKING PARTY

UNCLAS SECTION 01 OF 02 BEIRUT 000209 SENSITIVE SIPDIS STATE FOR NEA/ELA STATE PASS USTR FRANCESCKI STATE PASS USAID BEVER/LAUDATO/SCOTT TREASURY FOR PARODI/BLEIWEISS/CORREA USDOC FOR 4520/ITA/MAC/ONE NSC FOR MCDERMOTT E.O. 12958: N/A TAGS: ECON EFIN PREL PGOV LE SUBJECT: LEBANON: LOW EXPECTATIONS FOR NEXT WTO WORKING PARTY MEETING (ECONOMIC WEEK IN REVIEW, FEBRUARY 16 - 22, 2009) REF: BEIRUT 199 CONTENTS -------------- -- LOW EXPECTATIONS FOR NEXT WTO WORKING PARTY MEETING, PARLIAMENTARIANS REQUEST WTO TRAINING -- NO PROGRESS ON 2009 BUDGET LAW -- LEBANON TO SEND SECOND SHIPMENT OF ASSISTANCE TO GAZA -- MOODY'S UPGRADES LEBANON'S CREDIT RATING TO POSITIVE -- IIF CONSIDERS THE LEBANESE FINANCIAL SYSTEM RESILIENT TO GLOBAL SHOCKS LEBANON TO PRESENT NOTHING NEW AT WTO WORKING PARTY MEETING, PARLIAMENTARIANS REQUEST WTO TRAINING -------------- ¶1. (SBU) On February 20, Lama Oueijan, Senior Advisor to the Minister of Economy and Trade, told EconOff that Lebanon has no new offers to bring to Geneva on goods (as budget considerations prevent lifting tariffs) or services (where lawyers groups resist opening up legal services) during the upcoming WTO Working Party meeting on February 27. Oueijan said Parliament Speaker Berri promised parliament will approve WTO-related legislation in its next session on March 19, therefore Oueijan prefers to postpone bilateral meetings with the U.S. until March, when she might be able to present progress on legislation. Nonetheless, Lebanon already has bilateral meeting requests for next week in Geneva from the EU, Qatar, Cuba, China, Australia, and Canada, she said. Oueijan also noted that two parliamentarians from Berri's bloc, Yassin Jaber and Anwar Al-Khalil, sent a letter to the Ministry of Economy and Trade requesting a WTO training session in parliament. NO PROGRESS ON 2009 BUDGET LAW -------------- ¶2. (SBU) The budget for the Council for the South (CFS) continued to hold up passage of the 2009 budget law, despite attempts by President Sleiman, who met separately with Finance Minister Mohammad Chatah and Speaker Berri's envoy MP Ali Hassan Khalil early in the week to reach a compromise. CFS head Hajj Kabalan Kabalan told us February 19 that Chatah agreed to allot $40 million to the CFS for on-going infrastructure and utility projects in the south and West Bekaa, and submitted the proposal to the cabinet. Ministry of Finance DG Alain Bifani told us PM Siniora is using the CFS budget to "torpedo" passing the budget, in an attempt to constrain spending during this election year. This may be true, but we note that Bifani is a frequent critic of Siniora. LEBANON TO SEND SECOND SHIPMENT OF ASSISTANCE TO GAZA -------------- ¶3. (SBU) On February 19, President of the Lebanese-Palestinian Dialogue Committee (LPDC) Ambassador Khalil Mekkawi told us that Lebanon plans to send a second shipment of assistance to Gaza "very soon hopefully." This second shipment will consist entirely of medical supplies, and Mekkawi estimated the value of this shipment at about $250,000-$300,000. With this second shipment, the GOL would have spent about $450,000-$500,000 out of its one million dollars in assistance pledged to Gaza. Mekkawi added that as of a few weeks ago, about $70,000 in public contributions had been donated to the LPDC account opened for this purpose at the Central Bank of Lebanon. He said that as yet no money has been transferred from this account to Gaza. MOODY'S UPGRADES LEBANON'S CREDIT RATING TO POSITIVE -------------- ¶4. (U) On February 17, Moody's upgraded Lebanon's credit rating outlook to positive following an upgrade from negative to stable in December 2008. Moody's attributed the upgrade to the proven resilience of Lebanon's public finances to shocks. Commercial banks, the GOL's main lender, remain willing and able to rollover government debt given the continuing growth in bank deposits. The GOL has appointed Byblos Bank, Credit Libanais, and Credit Suisse as lead managers to rollover $2.3 billion in Eurobonds maturing in ¶2009. BEIRUT 00000209 002 OF 002 IIF CONSIDERS THE LEBANESE FINANCIAL SYSTEM RESILIENT TO GLOBAL SHOCKS -------------- ¶5. (U) According to a recently published report by the Institute of International Finance (IIF),the Lebanese financial system remains resilient to global shocks, and if relative political stability is maintained, GDP growth will reach about four percent in 2009, as compared to an estimated seven percent in 2008. The peg of the Lebanese Pound to the U.S. dollar has maintained Lebanon's financial stability, and the banking sector will remain sound and profitable with adequate liquidity to expand credit to the private sector and support economic growth, the report asserted. The GOL's main challenges remain huge fiscal and debt burdens. However, investors and depositors are comforted by Lebanon's track record of zero default in debt repayment, ample liquidity in the banking sector, and continued support by donors including international financial institutions, the IIF said. SISON