Inflation touches 10% in Lebanon

Inflation in Lebanon ran at 10% year-on-year in March, driven by the higher price of oil and food and a weaker dollar, central bank governor Riad Salameh said on Friday.

Salameh said a political crisis and security concerns in Lebanon meant it was not possible to confront this wave of inflation. The crisis, the worst since the 1975-90 civil war, has paralysed much of government, left the country without a president since November and triggered bouts of street violence.

"We expect stability in the lira exchange rate despite the return to an inflationary climate and the rate of inflation is currently 10%," Salameh told an economic conference in Beirut. He later told newswire Reuters that figure was measured from March to March.

Finance Minister Jihad Azour, speaking on the sidelines of the conference, said the central bank appeared "comfortable" with the level of inflation, which compared to an average of 4.5% for 2007.

"It doesn't seem to feel that it is in fact creating pressure that cannot be managed," Azour said, adding that the government had taken steps to curb inflation but there was a limit to what it could do.

"There is additional pressure. This pressure is being contained by the measures taken by the government: by providing subsidies and not reflecting the increase in oil prices on the consumer," he said.

Inflation has eroded the purchasing power of Lebanese, whose economy has also suffered because of the political crisis, assassinations, a militant Islamist insurrection in 2007 and a war between Hezbollah and Israel in 2006.

Azour said that 4% economic growth in 2007 was proof of "the steadfastness of the Lebanese economy".

Growth in the first quarter of 2008 was "showing a very strong recovery", he told Reuters, adding that 4% growth this year was "guaranteed". The level would be higher if the political crisis eased. It is being driven by exports, consumption and investment in equipment, he said.

Azour has said Lebanon's economy could be growing by up to 8% a year were it not for the country's instability.

Salameh said interest rates should remain stable in 2008. "There is the possibility of their reduction if the political situation improves," he said.

The political conflict pits a governing coalition backed by many Western and Arab governments, including the US and Saudi Arabia, against an opposition backed by Syria and Iran. (Reuters)

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