On February 15, the opposition Hezbollah alleged that Prime Minister Fouad Siniora’s government had misled the public over the actual cost of the war as part of a political campaign to undermine support for the Islamist party and its allies.

A study by the Consultative Center for Studies and Development, a research body linked to Hezbollah, claimed that the total cost of the war was $1.5bn, far below even the revised figure of $2.8bn issued by the state’s Council for Development and Reconstruction. The council’s initial estimate of the war’s impact on Lebanon had put the cost at $3.5bn.

According to Ali Fayad, president of the Consultative Center for Studies and Development, the damage done to commercial premises did not exceed $567m, while the cost of buildings damaged or destroyed in the fighting totalled $800m.

“In some instances the government exaggerated the cost of some infrastructure six times above the real value”, Fayad told a press conference in Beirut.

It its defence, government officials have said that the final tally of the physical cost of the conflict is still being added up.

There were also questions raised after the Higher Customs Council announced the trade figures for 2006 in early February. According to the council, Lebanon’s trade deficit came in at $7.16bn, compared to the $7.46bn of the previous year.

The easing of the trade deficit was due, according to the council, to a sharp rise in exports, which it said grew by $400m in 2006 to reach $2.28bn. Most of this increase was accounted for by a $325m increase in the sales of gold.

Though both Lebanon’s agriculture and industrial sectors recorded strong export growth for the first six months of the year, this trend went into reverse after the opening of Israel’s military operations in July.

According to Fadi Abboud, the president of the Association of Lebanese Industrialists, the sales of gold did not reflect an improvement in Lebanon’s export trade but a tragedy, as 80% of the $445m of gold exported in 2006 was sold by private citizens to raise funds.

“If we are exporting more scrap gold, this is not something we should be proud of. It means women are exporting their gold,” he said in the local press on February 14. “What we are trying to say politely is that what the Customs referred to as exports are not exports.”

While there may have been debate over the government’s figures for war costs and exports, there was little argument over other year-end statistics released early in February.

Figures from the ministry of finance confirmed expectations of a blow out of the budget deficit, which rose by 64% in 2006 to reach $2.9bn. While state revenues only dropped 1.49% for the year, to a total of $4.7bn, expenditure shot up to $7.6bn.

The news was no better from the ministry of tourism, which reported that there had been a 6.8% fall in the number of overseas visitors to the country in 2006, with the sector still battling to attract customers after the destruction of its peak season at the height of last summer’s conflict with Israel. Though the just over 1m tourists for the year was actually slightly better than industry experts had predicted, it was far short of the 1.6m to 2m that had been looked for at the beginning of last year.

However, the government did get one spot of good news in the middle of the month, with international credit finance agency Fitch leaving Lebanon’s key foreign and local currency issuer default ratings of 'B-' and its outlook prediction of stable unchanged in its latest assessment of the country, released on February 14.

The head of Fitch’s Middle East and Africa sovereign ratings, Richard Fox, said that the ongoing political instability in Lebanon had been balanced out by the strong support shown by donor nations at the Paris III summit at the end of January.

“Although no end is in sight to the political stand-off between government and opposition, key early warning indicators of financial market stress, such as international reserves and bank deposit levels, have remained remarkably robust,” Fox said.

Though most of the numbers may not look good for Lebanon, and the political situation has become even more tense after the bombing of two buses on February 13 left three dead and more than a dozen injured, the government appears determined to press ahead with its reform program, outlined at the Paris donors’ conference.

Source: OXFORD BUSINESS GROUP