Friday, May 09, 2008

Airport and border closures could cost Lebanon dearly

Airport and border closures could cost Lebanon dearly
'The first casualty will be tourism' - economist

By Osama Habib
Daily Star staff

BEIRUT: The continued closure of Beirut's Rafik Hariri International Airport and all ground outlets leading to Syria will cause heavy losses to the economy, economists and bankers warned on Thursday. "If the airport remains closed for a few more days or weeks then the first casualty will be tourism in Lebanon," economist Elie Yashoui told The Daily Star. Hizbullah and Amal supporters blocked all roads leading to the airport on Wednesday to pressure the government of Prime Minister Fouad Siniora to abandon early decisions to remove the security chief of the airport and seize all the so-called "illegal telephone lines" that are used for military purposes. Responding to the closure of the airport roads, supporters of the Future Movement blocked the roads leading to Al-Masnaa highway, cutting trade links with Syria. Yashoui said that Lebanon could lose $1 billion in revenues if the airport remained closed for few weeks. "The airport is a vital route as millions of tourists and businessmen travel each year to and from it," Yashoui said. Lebanon depends heavily on tourism and exports to boost the balance of payments and inject badly needed cash into the country. The country also exports most of its agricultural and industrial goods though Syria and this means that producers will have to find other, more expensive routes to ship their products.

Alan Wanna, the head of finance at Byblos Bank, said there was not yet panic in the market, adding that demand for the US dollar was very limited. "So far Lebanese depositors are not converting their pounds to dollars," Wanna said. But the banker warned that this could change if politicians escalated the crisis. "If the leaders refuse to start a dialogue and insist on escalating the situation the pressure on the local currency will increase," Wanna said. Bank Audi said in its last report that the dollar was again on offer in higher volumes during this three-day week, compared to the previous four-day week. The Central Bank continued to intervene as a buyer of the greenback surpluses at LL1,512.5 on Tuesday and Wednesday, yet it lowered its intervention rate to LL1,512 on Friday, for the first time since the summer 2006 war with Israel. The commercial banks traded the US dollar at a rate hovering between LL1,512.5 and LL1,513.5. Within this context, the Central Bank continued to increase its foreign assets to reach $13.94 billion at end-April 2008, growing by $395 million during the second half of April. Saad Andary, the deputy general manager of Bank of Beirut and the Arab Countries, said that the tense situation has apparently kept many bank customers at home. "We did not see many people buying dollars. As a matter of fact the Central Bank offered large dollar quantities in the market but many depositors preferred to hang on their local currencies," Andary said. Another banker noted that Lebanon had endure a far more difficult experience during the 2006 war. "The Lebanese are accustomed to the political rhetoric and two days of clashes will not induce to transfer their money outside the country," the banker argued. He added that Lebanese expatriates had not stop sending remittances to Lebanon at the peak of the war and predicted that this was not going to change now.

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