Lebanon's new government must send the right signals on economic reform regardless of who wins a June general election, Prime Minister Fouad Siniora said on Sunday, warning that the debt-laden state was “operating on a short leash.” Siniora also told Reuters his government was seeking to accelerate implementation of new infrastructure projects to boost confidence in an economy forecast to grow by 4 percent this year despite a global slowdown. “In the coming two years, we have at least $3 billion worth of projects that are going to be executed,” he said. A former finance minister, Siniora is a close ally of billionaire politician Saad al-Hariri, who heads an alliance of factions that hope to defend their parliamentary majority from an opposition coalition led by the Iran-backed Hezbollah. Siniora's cabinet has enjoyed financial and political backing from many Western and Arab governments. He said Lebanon's new administration would have to immediately “send the right messages to the world” on the economy. Lebanon has one of the heftiest public debt burdens in the world. “Because if they don't send the right messages, then definitely they will be speculating at a time that Lebanon cannot afford to have a speculative type of thinking,” said Siniora, prime minister since 2005. Siniora has sought to move ahead with major reforms, including the sale of two state-owned mobile phone firms. The sale, initially held up by a political crisis, has now been postponed because of poor market conditions. Reforms are seen as vital to putting Lebanon's public finances on a sustainable path. Privatization proceeds are to be used to pay off some of the public debt, which stood at some $47 billion in December, equivalent to around 160 percent of gross domestic product (GDP). The ratio was as high as 180 percent in 2006. “This tells you how much progress we have managed to achieve,” Siniora said. The next government must respect the existing approach to debt management. “That's how things are going to be done. Otherwise it is not in the interests of the Lebanese,” he said. Moody's Investors Service last week upgraded Lebanon's credit ratings, citing a “substantial improvement” in the country's external liquidity and the “proven resistance” of the public finances to shocks. Lebanon will need to borrow more this year to finance a total deficit projected at some $4 billion. Siniora said there was progress towards resolving a dispute that has held up approval of the 2009 budget, which has a deficit equal to around 12 percent of GDP. Siniora said Lebanon was “still witnessing a good and substantial inflow of capital”, registering a balance of payments surplus of some $700 million in January and February.
