VZCZCXRO6833
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #0508/01 1050954
ZNR UUUUU ZZH
R 140954Z APR 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 1515
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000508 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA 
STATE PASS USTR 
TREASURY FOR MNUGENT AND SBLEIWEISS 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/SINGH/YERGER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: CENTRAL BANK FOREIGN ASSETS INCREASE BY EIGHT 
PERCENT IN FIRST QUARTER OF 2008 (ECONOMIC WEEK IN REVIEW, APRIL 7 - 
13, 2008) 
 
 
CONTENTS 
-------- 
 
-- FINANCE MINISTRY RELEASES PROGRESS REPORTS ON REFORM 
IMPLEMENTATION AND.. 
-- ...HOLDS DONOR MEETINGS IN D.C. AND BEIRUT 
-- BUSINESS MONITOR INTERNATIONAL FORECASTS TWO PERCENT ANNUAL REAL 
GROWTH FOR NEXT FIVE YEARS 
-- CENTRAL BANK FOREIGN ASSETS INCREASE BY EIGHT PERCENT IN FIRST 
QUARTER OF 2008 
-- PUBLIC DEBT CONTINUES TO GO UP 
-- GE INTERESTED IN POWER SECTOR PROJECTS 
-- LEBANON DROPS IN CAPITAL ACCESS INDEX 
 
CENTRAL BANK FOREIGN ASSETS INCREASE 
BY EIGHT PERCENT IN FIRST QUARTER OF 2008 
--------- 
 
¶1. (U) The Central Bank of Lebanon (CBL) balance sheet reached 
$34.48 billion at the end of March 2008, compared to $32.3 billion 
at the end of 2007 -- an increase of 6.7 percent.  Assets in foreign 
currencies increased by eight percent in the first quarter of 2008, 
and reached $13.39 billion, up from $12.39 billion at the end of 
¶2007.  This increase in foreign assets is mainly attributed to the 
rise in the deposits of the financial sector due to capital inflows 
into the banking sector, and CBL intervention in the local market 
purchasing excess dollar supply. 
 
FINANCE MINISTRY RELEASES PROGRESS REPORTS ON REFORM IMPLEMENTATION 
AND... 
------------------ 
 
¶2. (U) The Ministry of Finance (MOF) released its Fourth (covering 
the period till the end of 2007) and Fifth Progress Reports 
(covering first quarter of 2008) on the implementation of the Paris 
III GOL's economic and social reform program.  Both reports are 
posted on the MOF website (www.finance.gov.lb).  The Fifth Progress 
Report indicated that the GOL progressed on 44 social initiatives, 
55 economic initiatives, and 41 infrastructure and privatization 
initiatives.  On resource mobilization, 59 percent of total pledges 
($7.6 billion) were signed into agreements with the public and 
private sectors. 
 
...HOLDS DONOR MEETINGS IN D.C. AND BEIRUT 
--------------- 
 
¶3. (U) MOF Minister Azour will discuss reform implementation and 
resource mobilization with donors at the Core group meeting on April 
12 in Washington, D.C., on the margins of the World Bank/IMF Spring 
meetings.  Subsequently, Finance Minister Azour will hold a Fourth 
Donor Meeting on April 17 in Beirut to review progress achieved and 
provide an update on the status of Paris III pledges.  Embassy will 
attend. 
 
BUSINESS MONITOR INTERNATIONAL FORECASTS 
TWO PERCENT ANNUAL REAL GROWTH FOR NEXT FIVE YEARS 
-------------- 
 
¶4. (U) In its last business forecast for the second quarter of 2008 
for the Levant regions, Business Monitor International (BMI) 
considered political risk and the impact of high oil and food prices 
as the main issues affecting its expectations for Lebanon.  BMI 
forecasted an annual real growth of two percent for the period 
2008-2012, with domestic momentum, a resilient banking sector, and 
huge reconstruction potential weakened by a negative political 
outlook and a vague economic policy. 
 
PUBLIC DEBT CONTINUES TO GO UP 
--------- 
 
¶5. (U) According to statistics released b the MOF, total gross 
public debt reached $42.74billion at the end of February, 
reflecting a 1.7 percent increase from the end of 2007.  Domestic 
debt increased by 2.8 percent from the end of 2007, reaching $21.4 
billion, while external debt rose by 0.6 percent from the end of 
2007 and reached $21.33 billion. 
 
GE INTERESTED IN POWER SECTOR PROJECTS 
----------- 
 
BEIRUT 00000508  002 OF 002 
 
 
 
¶6. (SBU) GE Regional General Manager Jean Claude Nasr told us that 
GE is interested in bidding as "equipment supplier" for the new 450 
MGW power plant project in Deir Ammar (north Lebanon).  He learned 
from the Higher Council for Privatization (HCP) that the request for 
Expression of Interest will be announced at the end of May/early 
June.  Nasr wants to make sure that the size of the plant does not 
disadvantage GE equipment when bidding for this project.  GE will 
give a presentation about its technology to concerned officials in 
two-three weeks in Beirut, he said.  GE main competitors are Siemens 
(German), Alsthom (French), Ansaldo (Italian), and MHI (Japanese). 
 
 
LEBANON DROPS IN CAPITAL ACCESS INDEX 
-------- 
 
¶7. (U) The Milken Institute ranked Lebanon 48 out of 122 countries 
worldwide and 7 out of 14 countries in the MENA region on Capital 
Access Index.  Lebanon ranked 33rd globally and fourth regionally in 
the previous survey.  Lebanon also ranked 14 out of 23 Upper 
Middle-Income Countries included in the survey, down from 6th place 
in 2007.  The index measures how well countries support economic 
activity by providing businesses with access to domestic and foreign 
capital. 
 
SISON