Since the civil war ended, Lebanon's reconstruction has been the government's top priority. Hariri's administration emphasized economic infrastructure development, embarking on ambitious building and public works projects. To fund this effort, the government borrowed heavily. Although the government ran up huge deficits, by 2000, much of the civil war damage had been repaired and many foreign investors had returned.
Unfortunately, the social and political divisions that caused the conflict have yet to be resolved. Sectarian tensions and unease about Syrian and other external influences continue and the Lebanese Forces (LF) are still banned. In the late 1990s, the government took action against Sunni Muslim extremists in the north who had attacked its soldiers, and it continues to move against groups such as Asbat al-Ansar, which has been linked to Osama bin Laden's al-Qaeda network. Although a number of Syrian troops withdrew from Lebanon since 2001, an estimated 18,000 Syrian troops remained in position in many areas of Lebanon in 2002.
Lahoud's administration has continued, although somewhat unsuccessfully, to push for efforts to abolish the "confessionals" system of government that continues to link political parties to religious affiliation. Religious affiliation and political practice have been intrinsically linked since the 1943 unwritten agreement that allocated political power in the confessional system, which was based on the 1932 census. Many of the provisions of the national pact were codified in the 1989 Taif Agreement, perpetuating sectarianism as a key element of Lebanese political life. The system is still so strong that it is nearly impossible to win a political office without solid support from a particular religious group. Under the agreement, public offices are based upon religious lines so that the president must be a Maronite Christian, the prime minister a Sunni Muslim, and the president of the National Assembly, a Shia Muslim. Lahoud has called the confessional the countries "greatest flaw" in that it "distorts religion, gives rise to instinct, diverts politics, protects corruption and dissensions. It hinders evolution and progress, so that it becomes vain to think of this nation's future, or its people's right to a peaceful life, as long as confessionalism is used as a tool to attain high positions."
Economic and administrative reforms have been extremely important in Lahoud's administration. The government has maintained a firm commitment to the Lebanese pound, which has been pegged to the U.S. dollar since September 1999. In late 2000, the government substantially reduced customs duties, adopted export promotion schemes for agriculture, decreased social security fees and restrictions on investment in real estate by foreigners, and adopted an open-skies policy. In 2001, the government increased gasoline taxes and approved a value-added-tax, effective in February 2002. A decrease in government expenditures was also approved. In 2002, the government began to focus on tax reforms and modernization, expenditure rationalization, privatization, and improved debt management. In 2003, Lebanon's public debt was $31 billion, equal to approximately 180% of gross domestic product. Parliament approved the 2003 budget that January, with plans to cut the deficit to $1.41 billion. This would be accomplished by cutting spending by 10% and increasing revenue by 16%. In approving the budget, the government agreed to drop plans to tax civil service pensions and severance payments. However, it agreed to impose a 5% interest tax on savings accounts and Treasury bonds. At the center of the budget negotiations was a debate over the privatization of mobile phone networks.