IMF approves $77 million emergency loan for Lebanon

Beirut- The International Monetary Fund
said on Monday it had approved the first IMF finance for Lebanon,
backing a $77 million emergency loan to help rebuild the country after
last year’s conflict with Israel.

The aid is meant “to protect financial stability, contain the budget
deficit, and to initiate structural reforms that are crucial to the
success of the authorities’ medium-term reform program for 2007-2011,”
an IMF spokesperson said.

Mohsin Khan, director of the IMF’s Middle East and Central Asia

Department, told a news conference that the loan, issued as emergency
post-conflict assistance (EPCA), would be available to Lebanon within
the next few days.

“The EPCA is part of a concerted international effort to provide
assistance to Lebanon,” Khan said, referring to $7.6 billion in aid and
loan pledges won by the country at a January Paris donors conference
after the 34-day war last July.

None of the money pledged in Paris has yet been paid to Lebanon and
some of the donors, including the European Commission and World Bank,
actually require the involvement of the IMF before they can hand over
any funds.

As a result, Monday’s news removes an important obstacle to the
payment of some of the Paris money, which Lebanon is counting on to
stay on track with an ambitious 5-year reform program.

“The authority’s financing strategy for this year relies on the
timely disbursement of donor support, which they have been promised,
and that is going to be very important in limiting the further buildup
of government debt,” Khan said.

The government of pro-western Prime Minister Fouad Siniora aims to trim back Lebanon’s hefty public debts.

These stand at $40 billion, representing 180 percent of the
country’s gross domestic product, and the intention is to lower this to
130 percent of GDP over five years, using a mixture of government
spending measures and privatization.

“2007 is shaping up to be a difficult transition year and in the
EPCA they commit themselves to containing the fiscal deficit, while
still at the same time allowing for relief and reconstruction
spending,” Khan said.

Acknowledging that the volatile regional political climate exposes
the country to swings in investor confidence, Khan said that it would
continue to manage its currency.

“The Lebanese authorities remain committed to foreign exchange
stability and this means they will maintain the exchange rate peg,” he
said.

Khan said that he expected the emergency loan to lead to a full
standby credit arrangement with the IMF next year, although size and
loan conditions still had to be worked out.

Picture: Children ride a bicycle near a building destroyed during
the war between Israel and Lebanon’s Hezbollah, in Beirut’s southern
suburbs. The IMF funding of $77 million in the form of an emergency
loan is to help rebuild the country after last year’s war with Israel.

Sources: Reuters, Ya Libnan