Identifier
Created
Classification
Origin
09BEIRUT556
2009-05-18 15:16:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Beirut
Cable title:  

LEBANON: TREASURY UNDER SECRETARY EXPRESSES PRAISE FOR

Tags:  ECON EFIN EAIR EIND PGOV KFLU LE 
pdf how-to read a cable
VZCZCXRO7106
RR RUEHBC RUEHDE RUEHDH RUEHKUK RUEHROV
DE RUEHLB #0556/01 1381516
ZNR UUUUU ZZH
R 181516Z MAY 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 4919
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 02 BEIRUT 000556 

SIPDIS

SENSITIVE

STATE FOR NEA/ELA AND EEB/IFD/ODF
STATE PASS USTR FRANCESCKI
STATE PASS USAID LAUDATO/NANDY/SCOTT
TREASURY FOR PARODI/BLEIWEISS/AHERN
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR SHAPIRO/MCDERMOTT

E.O. 12958: N/A
TAGS: ECON EFIN EAIR EIND PGOV KFLU LE
SUBJECT: LEBANON: TREASURY UNDER SECRETARY EXPRESSES PRAISE FOR
BANKS PERFORMANCE AND CONCERNS ABOUT HIZBALLAH (ECONOMIC WEEK IN
REVIEW, MAY 11 - 17, 2009)

CONTENTS
--------

-- TREASURY UNDER SECRETARY IN LEBANON
-- FIRST QUARTER MACRO INDICATORS IMPROVE, EXCEPT PUBLIC DEBT
-- UN FACT FINDING MISSION ON DIAMONDS VISITS BEIRUT
-- LEBANON'S EASE IN PAYING TAXES UNCHANGED

TREASURY UNDER
SECRETARY EXPRESSES
SUPPORT AND CONCERN
--------------------

UNCLAS SECTION 01 OF 02 BEIRUT 000556

SIPDIS

SENSITIVE

STATE FOR NEA/ELA AND EEB/IFD/ODF
STATE PASS USTR FRANCESCKI
STATE PASS USAID LAUDATO/NANDY/SCOTT
TREASURY FOR PARODI/BLEIWEISS/AHERN
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR SHAPIRO/MCDERMOTT

E.O. 12958: N/A
TAGS: ECON EFIN EAIR EIND PGOV KFLU LE
SUBJECT: LEBANON: TREASURY UNDER SECRETARY EXPRESSES PRAISE FOR
BANKS PERFORMANCE AND CONCERNS ABOUT HIZBALLAH (ECONOMIC WEEK IN
REVIEW, MAY 11 - 17, 2009)

CONTENTS
--------------

-- TREASURY UNDER SECRETARY IN LEBANON
-- FIRST QUARTER MACRO INDICATORS IMPROVE, EXCEPT PUBLIC DEBT
-- UN FACT FINDING MISSION ON DIAMONDS VISITS BEIRUT
-- LEBANON'S EASE IN PAYING TAXES UNCHANGED

TREASURY UNDER
SECRETARY EXPRESSES
SUPPORT AND CONCERN
--------------


1. (U) Under Secretary of the Treasury for Terrorism and Financial
Intelligence Stuart Levey visited Beirut on May 15. He met with
Minister of Finance Mohammad Chatah, the four Central Bank Vice
Governors, Chairman of the Banking Control Commission Walid
Alameddine, and members of the banking community to discuss a range
of issues including Lebanon's role as a regional leader in
anti-money laundering and countering the financing of terrorism.


2. (SBU) During his meetings, Levey expressed appreciation for the
resilience of Lebanon's banking system in the wider financial
downturn. He also expressed U.S. concerns about a May 13 article in
the Financial Times in which Hizballah described its extensive
support of Palestinian Hamas. (Note: Visit will be reported
septel. End note.)


FIRST QUARTER MACRO
INDICATORS IMPROVE,
EXCEPT PUBLIC DEBT
--------------


3. (U) Central Bank of Lebanon (CBL) figures showed that Lebanon's
balance of payments posted a surplus of $297 million in the first
quarter of 2009, compared to a deficit of $241 million in the same
period in 2008. This surplus was mainly attributed to the 5.3%
year-on-year increase in capital inflows, reaching $2.54 billion in
the first quarter of 2009. The trade deficit, although still high
at $2.2 billion, represented a 14.6% decrease compared to the first
quarter 2008.


4. (U) Deposit dollarization reached a five-year low of 67.7% in the
first quarter of 2009. Leading Bank Audi economic research
department noted that decline in dollarization of deposits has still
not been matched with a decline on the lending side, as foreign
currency loans account for 86% of total loans. The CBL is working
with the GOL to encourage commercial bank lending in Lebanese pounds
to the private sector to stimulate economic growth.


5. (U) Meanwhile, Lebanon's gross public debt continued to rise at
the end of the first quarter, by 1.8% from end-2008 and 10.7% from
end-March 2008, to reach $47.8 billion. Domestic debt increased by
22.7% to $26.5 billion, while external debt decreased by 1.2% to
reach $21.3 billion.

UN FACT FINDING MISSION
ON DIAMONDS IN BEIRUT
--------------


6. (SBU) A UN group of experts on Cote d'Ivoire visited Lebanon May
11-14 on a fact finding mission regarding the implementation of the
Kimberly process in Lebanon, acting Director General and head of the
Kimberly Process Office at the Ministry of Economy and Trade (MOET)
Fouad Fleyfel told us. The UN team's visit - its first to Beirut --
may be related to recent press reports about illicit diamond trade
in Cote d'Ivoire involving Lebanese citizens residing in Cote
d'Ivoire and elsewhere.


7. (SBU) The UN team met with Fleyfel, head of Customs at Beirut's
International Airport (BIA),the sole authorized entry for rough
diamonds, large jewelry shop owners, and four rough diamond
factories in the Greater Beirut area. Fleyfel noted that in 2007
and 2008 his office arrested two Lebanese for smuggling diamonds,
and referred their cases to the courts.

EASE IN PAYING TAXES

BEIRUT 00000556 002 OF 002


REMAINS UNCHANGED
--------------


8. (U) According to the World Bank/PricewaterHouseCoopers "Paying
Taxes 2009" report, Lebanon ranked 45 out of 181 countries worldwide
and 10 out of 18 MENA countries in terms of ease of paying taxes.
This constitutes a drop compared to 2008, when Lebanon ranked 33
worldwide and five regionally. The report noted, however, that the
change in ranking indicated improvement in other countries, rather
than a decline in Lebanon's performance, which remained almost
unchanged. According to the report, a standard 19 tax-related
transactions were paid in Lebanon each year and 180 hours per year
were required to deal with such transactions. Corporate tax reached
12% and labor tax was at 24%.

SISON