Hizbollah's compensations from abroad-Lebanon cbank

By Staff
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BEIRUT, Aug 31 (Reuters) Sizeable payments by Hizbollah to those who lost their homes in the war with Israel is likely to have been made with cash brought in from abroad, Lebanon's Central Bank Governor said in remarks published today.

Riad Salameh, in an interview with al-Akhbar daily, said the Lebanese economy could shrink by at least five per cent in 2006 if the Israeli air and naval blockade on the country persists.

Shortly after a UN-brokered truce took hold on August 14, Hizbollah handed out up to 12,000 dollars in banknotes to each family that lost its home in the bombardment. The compensation scheme appears likely to cost at least dollars 150 million.

''In principle, this (Hizbollah) money came through shipment, because it did not come from the Central Bank ... and not from the banking sector because there was a shortage in banknotes at the time,'' the newspaper quoted him as saying.

''The banking sector is obliged to declare any amounts of money it withdraws.'' The money is widely believed to have come from Iran, the main backer of the group, but Salameh said Hizbollah's action did not violate Lebanon's laws, adding that the central bank was ready to answer any international inquiries.

Israel has enforced the blockade on Lebanon since the war erupted on July 12. Its attacks also hindered movements into Lebanon through land but failed to halt them completely.

The money is meant to provide a one-year renting and furniture costs for each family until some 15,000 destroyed homes are rebuilt.

Hizbollah has not said where the funds are coming from. The United States and Israel accuse Iran of providing military and financial aid to Hizbollah but Tehran, which armed and funded the guerrilla group in the 1980s, insists now it only provides it with moral support.

Salameh said the war, which erupted after Hizbollah captured two Israeli soldiers in a cross-border raid, would bring down growth forecasts in 2006 to zero from five per cent, inflicting a 2 billion dollars loss on the economy. Another scenario, however, envisages a bleaker picture.

''The second scenario we have is linked to the length of the blockade and the delay in reconstruction,'' he said. ''This scenario is based on a negative growth of five percent at least, in which case the losses rise to 3 billion dollars.'' Israel has said it would only lift the blockade when a beefed-up U.N. force is deployed in south Lebanon and along the border with Syria to help the Lebanese army prevent arms shipment to Hizbollah.

The Beirut government says the Lebanese army has taken active steps to patrol the border. The Security Council resolution that led to the truce authorises UN troops to help secure the border with Syria, but only at Lebanon's request.

Lebanon's economy grew by one per cent in 2005 after the assassination of former Prime Minister Rafik al-Hariri shook its financial markets.

REUTERS LL KP1532

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