VZCZCXRO5218
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #0158/01 0411630
ZNR UUUUU ZZH
R 101630Z FEB 09 ZDK
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 4177
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000158 
 
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 ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: BUDGET DELAYED BY DISPUTE OVER COUNCIL FOR THE 
SOUTH (ECONOMIC WEEK IN REVIEW, FEBRUARY 2 - 8, 2009) 
 
BEIRUT 00000158  001.3 OF 002 
 
 
CONTENTS 
-------- 
 
-- COUNCIL FOR THE SOUTH STILL HOLDING UP THE BUDGET 
-- CDR OFFICIAL IS SKEPTICAL THAT GOL WILL CREATE MINISTRY OF 
PLANNING... 
-- FINANCE MINISTRY PREPARES TO ROLLOVER DEBT 
-- LEBANON RANKED LOW ON GOVERNMENT BUDGET TRANSPARENCY 
-- LTA WILL FOLLOW-UP ON TRANSPARENCY PARTNERSHIP MOU WITH FINANCE 
MINISTRY 
-- CENTRAL BANK GOVERNOR WILL OPEN NYSE ON MARCH 2 
-- MERRILL LYNCH MAINTAINS ITS RECOMMENDATION ON LEBANESE 
EUROBDONDS 
 
COUNCIL FOR THE SOUTH STILL 
HOLDING UP THE BUDGET 
--------------------------- 
 
¶1. (SBU) On January 29, the cabinet postponed discussions of the 
2009 budget draft for ten days until the return of President Sleiman 
from an official visit to Bahrain and the UAE.  This should allow 
time for politicians to resolve the issue of the budget allotment to 
the Council for the South, which has been delaying the passage of 
the 2009 budget.  While Parliament Speaker Berri's key advisor Ali 
Hamdan told us that Berri insists on a $40 million budget for the 
Council for the South - widely seen as a fund that Berri controls 
and hence a highly sensitive issue during an election year -- PM 
Siniora insists on limiting the Council's budget to $20 million to 
contain GOL spending in the absence of tax increases. 
 
¶2. (SBU) Hamdan told us Siniora aims to weaken Berri politically, 
cutting off his patronage while maintaining other institutions that 
provide patronage to March 14 politicians.  He said Berri's Bloc 
would instead support the creation of a Ministry for Planning to 
replace the Council for the South, the Fund for the Displaced (seen 
as providing patronage to March 14 Druze MP Walid Jumblatt), the 
Higher Relief Council and the Council for Development and 
Reconstruction (CDR) (both of which allegedly benefit primarily the 
Sunni constituency).  Dr. Jawad Adra, head of reputed research and 
polling company Information International, told us separately that 
the budget discussion is "trivial," the main issue being the 
preservation of the political turf of each group. 
 
CDR OFFICIAL SKEPTICAL THAT GOL 
WILL CREATE MINISTRY OF PLANNING 
--------------------- 
 
¶3. (SBU) CDR Secretary General Ghazi Haddad believes it unlikely the 
cabinet will approve the creation of a Ministry of Planning and 
close CDR.  He said this subject is being brought out now because PM 
Siniora disagrees with Parliament Speaker Berri regarding the 
Council for the South budget.  Haddad said the political class is 
not interested in planning, and pointed out that it did not back a 
ten-year Master Plan that the CDR had prepared in coordination with 
all the ministries about three years ago. 
 
FINANCE MINISTRY PREPARES 
TO ROLLOVER DEBT 
----------------- 
 
¶4. (SBU) In a February 2 meeting with the Ambassador and EconOff, 
Finance Minister Chatah said his ministry would in the coming days 
be selecting banks to participate in an approximately $2.6 billion 
debt exchange ($2.3 billion in principal, plus interest), during 
which maturing debt will be rolled over into longer-term bonds with 
three- to seven-year maturities.  Chatah noted that despite lack of 
progress in passing the 2009 budget, current law would allow him to 
issue up to $500 million in additional debt even before the budget 
is passed. 
 
LEBANON RANKED LOW ON GOVERNMENT 
BUDGET TRANSPARENCY 
------------------------- 
 
¶5. (U) On the margins of high-level discussions of non-transparent 
government entities (see para 1-4), on February 4, the Lebanese 
Transparency Association (LTA) indicated that Lebanon scored 32 out 
of 85 countries worldwide in the 2008 Open Budget Index (OBI) 
published by the International Budget Partnership (IBP) in February 
 
BEIRUT 00000158  002.5 OF 002 
 
 
2009, and ranked among countries that provide minimal information to 
citizens.  The survey pointed out delays in endorsing the budget, 
lack of transparency regarding government spending, programs and 
policies, and delays in publishing financial statements.  The OBI is 
an independent, comparative measure of budget transparency around 
the world prepared by IBP in collaboration with civil society. 
 
LTA WILL FOLLOW UP ON TRANSPARENCY 
PARTNERSHIP MOU WITH FINANCE MINISTRY 
-------------------------- 
 
¶6. (SBU) On February 4, LTA Executive Director Badri Meouchi told us 
LTA expects to meet with Minister of Finance Mohammad Chatah to 
follow-up on the implementation of the transparency partnership 
Memorandum of Understanding (MOU) that was signed in October 2007 
with former Finance Minister Jihad Azour.  Discussions will cover 
the implementation of the Code of Conduct by all Ministry of Finance 
(MOF) staff, exchange views on the communications strategy, and 
other priorities, Meouchi said.  This is a pilot project that is 
expected to be replicated in all the ministries, he said. 
 
CENTRAL BANK GOVERNOR WILL 
OPEN NYSE ON MARCH 2 
-------------------------- 
 
¶7. (SBU) President of the Banking Control Commission (BCC) Walid 
Alameddine told us that the Bank of New York is holding a one-day 
road show in New York on March 2 and has invited Central Bank 
Governor Riad Salameh to open the NYSE.  During the last two years, 
Salameh has received several awards for best Central Bank Governor 
in the MENA region.  Lebanon is also among the few countries that 
have not yet been seriously affected by the international financial 
crisis because of sound CBL policies.  Alameddine told us that he 
plans to be in Washington, D.C. on March 3 and would be available 
for meetings with USG officials. 
 
MERRILL LYNCH MAINTAINS ITS 
RECOMMENDATION ON LEBANESE EUROBDONDS 
-------------------- 
 
¶8. (U) Merrill Lynch (ML) maintained its market weight 
recommendation on Lebanon's external debt in its model portfolio of 
emerging market debt, and slightly decreased Lebanon's market weight 
by 0.8 percent to 6.9 percent.  ML noted that Lebanon has been one 
of the best performers, along with Iraq, in its portfolio since its 
upgrade to 'market weight' in May 2008.  Lebanon's allocation is 
ranked seven out of 18 countries in ML's portfolio, down from six in 
November 2008. 
 
SISON