Lebanon country profile

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Lebanon gained its independence from France in 1943.

Its population is a mixture of Shia and Sunni Muslims, various Christian sects and other prominent religious groups such as the Druze, and it has tended to be a magnet for the region's minorities. It is also home to a large number of Palestinian refugees.

In 1975, civil war broke out and dragged on until the 1990s. The war involved several neighbouring states including Israel, which launched a military occupation of southern Lebanon, and Syria, which still maintains troops in the east of the country.

The current president is former army leader General Emile Lahoud and the prime minister is Omar Karami. A crucial domestic issue facing the government is the huge public debt, built up by the need for spending on postwar reconstruction, which is overseen by the Council for Reconstruction and Development (CDR). Relations with the US have been strained by Beirut's refusal to freeze the assets of Hizbollah, which the US designates a terrorist organisation.

Table: Lebanon at a glance

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Economy

The chief economic problem is the size of the public debt, which stands almost twice the gross domestic product. The government aims to alleviate this by means of reducing budget spending, increasing indirect tax revenues, and using privatisation receipts to pay off portions of debt.

In November 2002, Hariri secured $4,400 million in concessionary loans from international donors at the Paris II conference, which will reduce debt servicing costs. Value-added tax (VAT) was introduced in February 2002 while a law has been passed requiring that all privatisation revenues be used for repayment and allowing forward revenues to be drawn on privatisation deals.

Privatisation of the telecoms and electricity sectors are furthest advanced, and also on the agenda is the introduction of private sector operations for the water and wastewater sectors. Despite its small population, Lebanon's GSM market is one of the healthiest in the region, and the large volume of traffic makes for lucrative opportunities. The 2003 budget proposes cutting spending through trimming administration costs and limiting capital investment to productive projects.

Table: Economic indicators

($ million, unless stated) 

Sectors

Construction

In construction, another phase in the redevelopment of Beirut is under way in the form of a series of new commercial and hotel developments, the largest of which is the Marina Towers complex. Elsewhere in Lebanon project work is focussed on the rehabilitation of water, wastewater and electricity infrastructure ahead of privatisation. The cost of repairing Lebanon's water distribution networks is estimated at as much as $1,000 million.

Financial market

In the financial sector, a series of mergers have effected gradual consolidation in a previously overcrowded market. The central bank, Banque du Liban, has been instrumental in keeping the government's finances afloat, intervening several times in the last few years to ensure the exchange rate remains stable.