'Economic, financial and fiscal indexes show a marked improvement following the Paris II conference,' said Finance Minister Siniora. Supplanting short-term, high-interest loans with long-term, low-interest debt had helped to breathe new life into the economy, he said, but cautioned that 'the failure to implement the necessary structural reforms has led to a less-than-required, but realistic, 2004 budget proposal'.

According to Siniora's figures, the lion's share of total expenditure - 86 per cent of the budget excluding debt servicing - is allocated to non-discretionary expenses. Total expenditure, excluding debt servicing, is projected at $3,300 million, compared with $3,066 million in 2003. Some $2,266 million - 69 per cent of the total - is allocated for public sector wages and related expenses.

Total revenue is projected at $4,266 million with an initial surplus of $966 million. Debt servicing is forecast to rise to $2,866 million in the absence of further privatisation measures. 'The 2004 draft budget does not include any reform articles,' Siniora said. 'Non-implementation of reforms and privatisation led to a much higher deficit than the 25 per cent projected for 2003.'

However, he stressed that the deficit may drop below 30 per cent next year if proposed reforms - including the privatisation of the telecoms and electricity sectors - were implemented.

Exchange rate: $1=£Leb 1,508