THE POLITICAL CRISIS IS ENDANGERING THE ECONOMIC STABILITY OF OUR COUNTRY

Lebanon plunges on risky countries list

12 March 2008
BEIRUT: Euromoney magazine ranked Lebanon 127th worldwide in terms of country risk, down by 11 notches from the 116th place globally in September 2007. The new ranking was released by Euromoney magazine in its semi-annual survey on country risk of 185 nations conducted in March 2008.
On a yearly basis, Lebanon's ranking fell by an even further 16 notches, as it ranked in the 111th place worldwide in March 2007.
Bank Audi, which published this report, said that Lebanon's score dropped by 4.9 percent from 38.95 out of 100 in September 2007 and by 3.2 percent from 38.26 in March 2007 to reach a current 37.03.
The government was hoping to achieve between five to seven percent growth in 2007 on the back of windfall crude prices in the oil-producing region.
But a series of assassinations and the political deadlock caused the country's gross domestic product growth to shrink to less than two percent last year.
In addition, the negative rating of Moody's and Standard & Poor's has complicated the government's attempts to borrow money from international markets at low interest rates.
Regionally, Lebanon ranked 16th out of 19 countries in the Middle Eastern and North African (MENA) region, dropping two spots from the 14th position in September 2007, as well as in March 2007.
"The drop in Lebanon's score over the half-year period between September 2007 and March 2008 has been coupled with a similar regional trend as the average score of MENA countries fell, by 1.1 percent, from 52.5 to 51.9," the report said.
The magazine said that in the past six months, the region's exposure to risk has risen, but not significantly as it has become adapted to turmoil.
Euromoney said the political risk accounts for 25 percent of the score's weight and refers to risk of the nonservicing of payment for goods or services, loans, trade-related finance and dividends, and the nonrepatriation of capital.
Lebanon scored 7.41 out of 25 on the latter category, with its score falling by 0.5 percent from 7.45 from the previous survey. Economic performance accounts for another 25 percent of the weight and is based on gross national income (GNI) figures per capita and on results of the Euromoney poll of economic projections.
In this category, Lebanon saw a sharper decline of 19.9 percent to score 5.73 out of
Debt indicators account for 10 percent of the weight and are calculated using the World Bank's total debt stocks to gross national product (GNP) ratio, debt service to exports ratio, and current account balance to GNP ratio.
Despite the 4.1 percent drop, Lebanon's score is still within the report's acceptable range at 7.21 out of 10.
Lebanon's debt-repayment performance remained unchanged from several previous surveys, attaining a perfect score in this category.
"Naturally, this is attributed to Lebanon's history of never defaulting on its debt. Credit ratings account for 10 percent of the weight and represent the nominal values assigned to sovereign ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings."- Bank Audi's Lebanon Weekly Monitor

Lebanon hopes for $1 billion Saudi deposit - minister

Reuters - Thursday, March 13
BEIRUT, March 12 - Lebanon's government has asked Saudi Arabia to deposit $1 billion at the central bank to boost the country's foreign currency reserves, the finance minister was quoted as saying on Wednesday.

"We, as a government, requested from the Saudi leadership a new deposit of value $1 billion. We detected a responsiveness which we hope will be translated soon," Jihad Azour told the pan-Arab Asharq Al-Awsat newspaper. "This will strengthen the reserves of the central bank and monetary stability," said Azour, whose government is locked in a paralysing political struggle with opposition forces led by Hezbollah and backed by Syria.
Saudi Arabia is a strong backer of the Beirut governing coalition. Azour told Reuters on Monday there were "positive indications" that Riyadh would make a deposit at the central bank. But he declined to give the amount. Azour said in the interview with Reuters there was no short-term need for the funds, but the deposit would send "a very positive signal to the market".
Lebanon's strong foreign currency reserves, measured at $9.8 billion at the end of 2007, were one reason cited by Moody's in a Feb. 7 statement for maintaining its low B3 rating on the country's government bonds.
Standard & Poor's in January cut its long-term sovereign foreign currency credit rating on Lebanon by one notch to "CCC+" from "B-" because of the political conflict -- the worst since the 1975-90 civil war.
The crisis has paralysed much of government, left the country without a president since November and led to bouts of street violence between followers of the rival sides.
Lebanon is saddled by public debt of some $42.06 billion -- equal to some 171 percent of its gross domestic product.