Annual MeetingsStatement by H.E. Fuad Siniora Minister of State for Financial Affairs Governor of the Bank for Lebanon Annual Meetings
President of the World Bank
Managing Director of the International Monetary Fund
It is indeed an honor and a great pleasure to address you today on behalf of Lebanon, a country that has suffered devastating and dehumanizing wars on its soil, but succeeded, through the tenacity and perseverance of its people, to resurrect itself and to join, once again, the peaceful nations of this world. Today, our people are bound more than ever to their independence and democratic institutions, and are firmly committed to the principle of coexistence and collective living, as well as to a comprehensive, just and lasting peace in the Middle East.
Lebanon, since its independence in 1943, has always assumed a leading role in the Arab World as it evolved into the business, financial and touristic center of the region. The advanced educational system and its strong tradition of openness and liberalism bestowed on Lebanon a comparative advantage as an indispensable intermediary between Arab countries and the rest of the world.
However, it is to Lebanon’s misfortune that the regional political problems occurring during the early 1970s were reflected on the internal web of the country. Consequently, between 1975 and 1990, as the rest of the world progressed, Lebanon suffered from instability and violent conflict. War damage to infrastructure and physical assets is estimated at USD 25 billion with none of the principal sectors emerging from the war unscathed. As a result these wars, effective control over the budget was lacking particularly from the mid-1980’s onwards, which entailed spiraling domestic demand pressures and inflation together with rapid and sustained depreciation of the Lebanese pound. Most significantly, and to the dismay of all Lebanese and many of our friends in the international community, a distorted image of Lebanon was projected to the world and the word “Lebanization” entered the English vocabulary.
Fortunately, the basis for a peaceful settlement to the conflict was provided by the 1989 Taif Accord for national reconciliation. Since then, the government’s most important accomplishment has been the restoration and enhancement of the internal political stability and security in the country, the Lebanese security forces are once more reunited and the militia groups have been successfully dissolved and disarmed. At last, law and order have been re-established.
The restoration of peace and security and the formation of a new and credible Government in October 1992 following the first parliamentary elections in almost 20 years fostered renewed confidence especially since the country began to operate as a coherent state. Nonetheless, as you are all aware, a legacy of seventeen years of war and economic dislocation poses an extremely daunting challenge that requires clarity of mind and purpose, a strong commitment and stubborn perseverance. Let me assure you that the Lebanese Government is firmly committed to the reconstruction and rehabilitation of the Lebanese economy with particular emphasis on infrastructural development.
Upon taking office, the present Government succeeded in restoring a sence of confidence in the economic management of the country. This was reflected in the substantial reduction in the budget deficit, the sizeable inflow of capital, and more specifically in the appreciation of the Lebanese pound which broke the cycle of exchange rate depreciation and inflation.
While welcoming these positive economic developments, we recognize fully that these gains need to be consolidated and built upon so as to ensure their sustainability. With this in mind, the present Government adopted several measures aimed at containing and reducing the drain on public resources through public expenditure control and enhancement of revenue collection, to date, the results of these efforts have been very encouraging.
In framing fiscal policy, however, the Government is striving to simultaneously achieve its goals of deficit reduction and the preservation of price and exchange rate stability on one hand, and the regeneration of economic activity on the other. It is thus preparing a reconstruction and public investment program that, over a ten year period, will require about ten year period, will require about ten billion Dollars. This program represents our vision for the future and aims at rehabilitating and expanding the destroyed infrastructure and productive capacity so as to enable Lebanon to regain and build upon its previous role in the region. Currently we are focusing on an initial three year investment program that will begin to lay the foundations of a smooth functioning economy.
Indeed, we recognize, fully, that the objective of restoring economic prosperity and achieving rapid and sustained economic growth hinges, crucially, on our ability to mobilize private sector resources, both Lebanese and international, towards domestic private investment. In this context, it is essential to recall that despite many years of successive wars on Lebanese soil, Lebanon has never wavered from meeting its obligations and honoring its external commitments. Most significantly, Lebanon has retained the sanctity of its liberal and free economic system characterized by an open trade and exchange system, full currency convertibility, a highly deregulated production structure, and sacrosanct respect for private property.
In sum, we in Lebanon have placed our hopes on the abilities of our people both at home and abroad and the capabilities of our private institutions to shoulder the main burden of rebuilding our country, however, the needs that have evolved over a long period of chaos are far greater than what we can hope to mobilize from the Lebanese alone. Consequently, we look to our friends in the International community to support and assist un in overcoming the daunting challenge confronting us. History has taught us that it is only through the collective mobilization of internal and external resources and support that a country torn by war can hope to rebuild. Here I note with appreciation the statement made on behalf of the Arab Governors of the World Bank and the international monetary Fund and by the Ministers of the Group of Twenty Four on International Monetary Affairs calling on the International financial community to support Lebanon’s reconstruction and rehabilitation efforts.
Today, as we awake from our prolonged nightmare, we observe, sadly, that the process of fragmentation, disintegration and destruction has spread throughout many parts of the world. To all the people that are suffering this undeserved plight, let me assure you that the Lebanese understand fully what you are going through and sympathize greatly, with your current misfortune. However, we in Lebanon also know that the will of life ultimately triumphs over wars and that nations fragmented by conflicts emerge stronger, unanimous, and more capable of rebuilding. Through our own efforts in Lebanon as well as through the assistance of the international financial community, let us all hope that the word Lebanization will from now on be used to describe reintegration, coexistence, and nation building.