Critics decry 'destroy and lend'
Lebanon policy By Emad Mekay
WASHINGTON - Lebanon is firmly en route to
becoming the third entity in the Middle East after
Iraq and the Palestinian territories to experience
a devastating Washington-backed war and a massive
influx of new illegitimate debt to cover
reconstruction expenses, anti-debt activists say.
A conference held on Thursday in Stockholm
for donors raised more than US$940 million in
pledges of new money to reconstruct Lebanon after
33 days of Israeli bombing of the country's
bridges, roads, factories and other
infrastructure.
More than 1,100 Lebanese
people were killed in the conflict
between Israel and Hezbollah,
a third of them children under 12. More than a
million were forced to leave their homes.
Initial official figures estimate the
first phase of reconstruction at $2.5 billion.
Damage includes some 150 bridges and a
15,000-tonne oil spill that polluted 140
kilometers of coastline.
According to the
United Nations High Commissioner for Refugees,
60,000 housing units in Lebanon were damaged in
the war, of which at least 15,000 were destroyed
while another 15,000 sustained major damage.
Since the August 14 ceasefire, the UN says
the return of hundreds of thousands of people to
their homes has been hampered by enormous
quantities of unexploded ordnance, especially the
bomblets scattered by cluster bombs, which will
place a long-term drain on the government.
Prior to the conference, the Lebanese
government said at least $540 million would be
needed to help the country with short-term
recovery efforts.
On Thursday, the
International Monetary Fund (IMF) said the damages
could reach $3.5 billion or more for
infrastructure alone.
"We have heard of
preliminary estimates of $3.5 billion in
infrastructure damage, to which one needs to add
the impact of the massive displacement of the
population, the exodus of many professionals, and
possible private sector bankruptcies," the IMF's
representative at the Stockholm meetings said in a
statement.
At this rate, Beirut will most
certainly continue to turn to international
lenders and donors for help with reconstruction
for a long time. And this, debt watchers say, will
in turn plunge the country into greater debt.
World Bank figures show that Lebanon was
already up to its neck in debt - some $22.2
billion - even before the war. For a country of
only 3.5 million people, the smallest Arab nation,
it is a colossal burden.
"What was already
a difficult budgetary and debt situation has been
made much more precarious by the conflict," the
IMF said. Government debt stood at 175% of gross
domestic product (GDP) at end-2005, one of the
highest ratios in the world. "The conflict has
made matters much worse," the IMF said.
The country's main creditors are Saudi
Arabia and France. Both have pushed for a
neo-liberal set of policies in Beirut that led to
the privatization of pubic assets and, critics
say, the empowerment of local elites and foreign
companies at the expense of the middle classes and
the poor.
The European-based Committee for
the Abolition of Third World Debt (CADTM) notes
that in 2004, Lebanon paid out $4.4 billion to
service its external debt and warns that new
borrowing will bring further pressure from rich
nations and international financial institutions
such as the IMF.
"This implies another
increase in its debt and in new economic measures
of structural adjustment which accompany it," said
Éric Toussaint and Damien Millet of CADTM in a
brief assessment of the country's new needs.
"Therefore, the Lebanese people are going to have
to pay very dearly, in the years to come, for
consequences of this war inflicted by Israel in
violation of international treaties governing
relations between states."
As with Iraq in
2003, a foreign country came in and destroyed the
country's infrastructure, only to give foreign
companies and institutions power in the subsequent
reconstruction efforts, they said.
For
example, the Paris Club of bilateral creditors
gave Iraq a partial and conditional debt reduction
in 2004 as long as it followed economic
prescriptions from the IMF. The Paris Club figures
say the country's total debt for 2005 was $63.2
billion, or 183% of GDP.
Now Iraq is back
to borrowing from multilateral lenders such as the
IMF and the World Bank. The IMF alone lent Iraq
$685 million last year.
"The Lebanese
people paid the first time by giving their lives,
losing their loved ones, enduring the destruction
of their homes, their property and
infrastructure," the authors said. "They must not
pay a second time by being bled dry to finance
reconstruction."
Israel has also destroyed
most of the Palestinian infrastructure,
consistently targeting power-generation stations
as well as government ministry buildings.
"Palestine, Iraq and Lebanon must demand
accountability from their aggressors," the CADTM
analysts say.
For Lebanon, they suggested
that its people demand cancellation of their debts
instead of allowing their government to seek more
aid and new loans.
"For Lebanon, a
possible solution resides in the immediate
cancellation of its debt and the establishment of
funds for its reconstruction, which would be fed
by reparations deposited by Israel," the authors
suggested.
The United States, which backed
the Israeli campaign and helps equip and finance
the Israeli army, should also contribute to the
fund, they said. "It is only then that it will be
possible to say that the Lebanese people will have
received justice."
In a telephone
interview from Paris, Millet acknowledged that
their proposal will not fly without the commitment
of the Lebanese government, which as part of the
local elite and ruling class is unlikely to back a
proposal that would not benefit local businessmen.
He argued that some rich Lebanese whose
wealth is held in Western banks should invest in
their own country's bonds.
"They have no
interest in [debt] cancellation because
cancellation will give power to those who suffer
from the debt," the poor and the middle classes,
Millet said.
The IMF itself acknowledges
that without highly concessional new financing for
Lebanon, there is a real risk of the total
collapse of the Lebanese economy. The institution
did not mention grants or debt cancellation.
The combination of a growing government
financing need, higher world interest rates, and
lower GDP growth will all certainly cause
Lebanon's debt to spiral upward.
