Tuesday, July 25, 2006

Monday 24th july 2006

I'm sorry to disappoint you, but today , nothing happened yet : condy riceis still here, so we're having a break.I'm going to the hospital this afternoon , actually a group of my colleagues in As-Safir is going : it's the birthday of Fatima : she's turning twleve today. Her body is burnt and she can't use her arms or legs. We got her awalkman (couldn't think of anything better to give to someone who has no arms or legs) and some books. We also got her a cake. Her whole family was hiding in a shelter in Blida in the south when the Israelis bombed them. She was burnt and her dad lost his legs. She told our colleague who went to seeher yesterday that her dad was planning on moving them to Beirut for her birthday anyway. I didn't know poor people celebrated their birthdays too...it also turned out she's the room mate (in the hospital) of Kinda's friend, whose picture she saw yesterday in the newspaper and wanted to visit. This morning she asked me when I was reading the newspaper : wein (where is) baby ? , so I knew she did not forget that I promised her I'll take herthere I'll tell you about her when we get back, for now I'm sending some picture and since not much happened last night, I tought there was room forme to send 2 or 3 pictures from Gaza : well, they're the same bombs, right?I'm aslo sending this analysis from reuters :Lebanon will need billions of dollars in aid to recover from Israel's war with Hizbollah, which has ruined many civil installations, hit tourism,forced businesses to close and forced hundreds of thousands to flee. The war is not over yet, but economists say the country's infrastructure has so far sustained $1 billion worth of damage after Israel bombed roads,bridges, ports and airports. Beyond damage to bricks and mortar, the Lebanese pound has come underpressure, the stock market has temporarily closed, and tens of thousands of foreigners have fled the war. Traders say the central bank spent $500 million last weekdefending thepound, though they add that the central bank has plenty of reserves to relyon and pressure is now declining.
Marwan Iskandar, a leading Lebanese economist, said the war could forcemany firms to close and cause the economy to shrink2-3 percent. This implies about $2 billion in lost growth, not to mention some $600 million in lost government income. Lebanon's economy had been growing at a healthy 6 percent or so before the crisis broke on July 12 when Hizbollah guerrillas seized two Israeli soldiers in a cross-border raid. "We are talking fairly enormous losses here," Iskandar said. "We will definitely need $3 billion in assistance in the very short term inthe nature of donations rather than loans. Much depends on the speed withwhich reconstruction can proceed, which depends on the speed and size of assistance." Even before the war broke out, Lebanon was struggling to cuta publicdebt above $35 billion, worth some 180 percent of GDP. Lebanese politicians had bickered for months over a draft reform plan, which foresees privatisation of the power and telecommunications sectors,higher taxes and lower spending. Lebanon had hoped to present the reform programme eventuallto potentiallenders at an international debt aid conference. What was a high priority just two weeks ago has been knockeddown thelist by a growing humanitarian crisis. SHELVING REFORMS "The effect on the economy is going to be very, very drastic. Forget reforms for the moment. We will not be in the mood for a while, possibly notfor a long time to come," said Shadi Karam, chairman of BLC Bank. "I hope the mood in the donor countries, which was not to give Lebanon a penny unless it reforms, will tone down." International credit ratings agencies have already cut Lebanon's outlookdue to the violence. Fitch has affirmed its current rating of 'B-' but cutthe outlook from positive to stable. Standard & Poor's put its 'B-' credit rating for Lebanon on credit watch with negative implications. Those ratings are already far below investment grade and Fitch said thewar's impact would be worse than the slump after last year's killing offormer Prime Minister Rafik al-Hariri. "The government will have to return to the market to borrow. You have torebuild roads and bridges and get things in and out.Many private concerns in the Bekaa Valley and the south have also been destroyed," said Karam. "To try to avoid crowding out financial resources for the privatesector, which also needs to rebuild, we will need as much from donors as wecan get."
Lebanon has a long history of weathering or bouncing back from crises, but bankers and economists say it will not be easy to lure back investorsunless a lasting ceasefire is reached. "If the solution is perceived as final and Lebanon can start rebuildingwhat is damaged, then we can foresee a medium term recovery," said Joe Sarrouh, adviser to Fransabank's chairman."People need to re-establish confidence for investment." Lebanon's financial markets fell sharply after the murder of Hariri, abillionaire tycoon who masterminded the reconstruction of downtown Beirut after the 1975-1990 civil war. But the markets recovered to record highswithin months. Flush with petrodollars, Gulf Arab investors poured over $1 billion intoLebanese real estate alone this year. Arab tourists had descended on Lebanon before the crisis emptied hotels. Whether Lebanon will recover now depends on a rapid return to stabilityand a lasting solution to Hizbollah's weapons -- tough challenges forLebanon's weak and divided government. "There is no interest in bringing Lebanon back to a very threateningsituation, so I think we will get some help,"Sarrouh said. "But the situation really is disastrous from a humanitarianpoint of view, so it is too early to speculate."


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