Conflict will see public debt soar to $41b

Beirut: Lebanon's public debt is expected to reach around $41 billion by the end of 2006 as a result of Israel's war with Hezbollah, Finance Minister Jihad Azour said.

He told Reuters that an eight-week Israeli blockade of Lebanon's airport and territorial waters, set to be lifted by yesterday, had a direct impact of around $45 million a day on the country's trade activity.

"The impact goes further than this in terms of tourism activity, several other sectors and public finances," he said.

Asked about the impact on the country's public debt, he said: "We expect the debt to reach approximately $41 billion by the end of the year."

Lebanon's debt, mostly accumulated after the 1975-1990 civil war, stood at around $35 billion in 2005. It has one of the highest debt ratios in the world, almost twice as large as gross domestic product.

Azour said in an interview with the Daily Star newspaper that Lebanon's GDP "fell by 7-8 per cent" as a result of the war and the Israeli blockade.

Central Bank Governor Riad Salameh said late last month the war would bring down 2006 growth forecasts to zero from five per cent but predicted a bleaker scenario of negative growth depending on the length of Israel's blockade.