A Bundle Of English Reports, News and Editorials For January 27-28/2020 Addressing the On Going Mass Demonstrations & Sit In-ins In Iranian Occupied Lebanon in its 103th Day
Compiled By: Elias Bejjani
January 28/2020
Titles For The Latest English LCCC Lebanese & Lebanese Related News & Editorials published on January 27-28/2020
Lebanese 2020 budget passes despite concerns from civil society and protesters
Parliament Approves 2020 State Budget with 49 Votes
Lebanon’s parliament passes 2020 budget as protests continue
Hariri on Budget Session: Mustaqbal Won’t Boycott or Obstruct Institutions
Diab Chairs Policy Meeting, Says Budget Approval Sends Positive Signal
Jumblat: Budget Approval Better than Vacuum, Extrabudgetary Spending
Sayyed at Parliament: This is Not Jamil al-Sayyed’s Govt.
President receives Ministers Akar and Najm, discusses ministries’ work
Rahi tackles developments with Kataeb chief
Several Lawmakers Boycott Budget Session
Injuries, Arrests as Beirut Protesters Seek to Disrupt Budget Session
Lebanon’s bonds fall as debt restructuring decision looms
Heavy security in Beirut as parliament convenes on budget
Diab Says Won’t Obstruct Budget Prepared by Previous Cabinet
Top global banking agency proposes an IMF bailout/TK Maloy/Annahar/January 27/2020
US Holds Back from Sanctioning Non-Shiite Lebanese Officials after Hale Intervenes/Mohammed Choucair/Asharq/ Al Awsat/January 27/2020
Lebanon: What Distinguishes Today/Hazem Saghieh/Asharq Al Awsat/January 27/2020
Where Failure Is More Dangerous Than Coronavirus/Ghassan Charbel/Asharq Al Awsat/January 27/2020
Details Of The Latest English LCCC Lebanese & Lebanese Related News & Editorial published on January 27-28/2020
Lebanese 2020 budget passes despite concerns from civil society and protesters
Abby Sewell, Al Arabiya English/Monday, 27 January 2020
Lawmakers in Beirut passed a budget Monday over the objections of protesters – who attempted to block access to the Parliament building – and a number of economists raised concerns that the measures laid out in the fiscal plan could worsen the country’s economic woes. The budget vote took place as protesters and security forces scuffled outside the perimeter that had been set up around the Parliament building – concrete blast walls were hastily erected in recent days to keep demonstrators away from government buildings in downtown Beirut – and a number of protesters were arrested. Parliament approved the budget with 49 members supporting the plan, 13 in opposition and eight abstaining.
Legislators from the Future Movement party of former Prime Minister Saad Hariri, who joined the session at the last minute, providing a quorum for it to proceed, opposed or abstained from voting, according to Lebanon’s National News Agency. Protesters objected to the adoption of a budget drafted by the previous government, which was ousted as a result of the mass demonstrations, with Hariri resigning on October 29. Some also questioned whether lawmakers could legally adopt the budget when the newly appointed Cabinet has yet to be confirmed. Hariri’s replacement, Prime Minister Hassan Diab, said Monday that his government would not stand in the way of endorsement of the budget prepared by the former Cabinet, and would leave it to the Parliament to discuss and approve the bill.
“Constitutionally, it’s blurred,” said Jad Chaaban, an associate professor of economics at the American University of Beirut who has been supportive of the protests. “But ethically, politically, and also from a governmental perspective, how can you vote [on] a 2020 budget that is basically binding to the new government, knowing that this budget, first, has now many wrong estimations because inflation is now very high and growth figures definitely will plummet? And, second, how can you tie the hands of the new government when you’re saying this government will go out and implement reforms?”
The budget projects a government deficit equal to about 7 percent of GDP. In an analysis issued ahead of the budget vote, Kulluna Irada, an NGO pushing for political reforms, noted that the projected deficit for 2020 is 4.8 trillion Lebanese lira compared to 6.8 trillion in the 2019 budget and about 7.3 trillion in reality for 2019, but argued that the projected “cuts in spending are nor credible, nor sustainable.”
The group added that the projected deficit reduction, which is largely based upon a “gentleman’s agreement” with the Lebanon’s central bank, Banque du Liban (BDL), to waive the interest on government debt, is a continuation of the past practice of using “monetary policy to cover for fiscal spending, and transfer the government’s deficit to BDL, has led the country to its current financial position and has depleted BDL’s foreign exchange reserves down to alarmingly low levels.”The budget “relies on a significant and artificial reduction of the cost of servicing the local debt, without dealing with the stock of debt,” the group wrote. “We are worried that such temporary solutions would only postpone the inevitable while increasing the cost on society through inflation and the devaluation of the lira.”The lira, officially pegged to the dollar at 1,507 lira to the dollar, has been undergoing de facto inflation in recent months, with the exchange rate on the street rising to more than 2,000 lira to the dollar. Ibrahim Kanaan, chair of finance and budget parliamentary commission, acknowledged during the session that revenue projections might not be accurate but said that passing the budget is a necessary first step toward getting the country out of its fiscal crisis, but that “our work is not enough unless it is followed by an urgent plan to get out of the crisis and reach safety.”“Lebanon today is at a critical juncture in terms of the financial situation as a whole,” he said. “It requires everyone to completely remove this file from the circle of political tensions… we are in a structural financial crisis, and we have to admit it first and work hard to address it second.”
Parliament Approves 2020 State Budget with 49 Votes
Naharnet/January 27/2020
Parliament on Monday approved the 2020 state budget in a controversial session that was boycotted by several blocs and MPs. MPs from the Strong Lebanon bloc, the Loyalty to Resistance bloc, the Development and Liberation bloc and the Social Nationalist bloc in addition to the lawmakers Nicolas Nahas and Adnan Trabulsi voted in favor of the bill, a total of 49 legislators. The Democratic Gathering bloc meanwhile abstained from voting as MP Farid al-Khazen voted against the budget. As for the al-Mustaqbal bloc, some of its members abstained as other members voted against.
The 2020 budget was drafted by the government of former Prime Minister Saad Hariri, who resigned in late October in response to nationwide protests. Protesters, and some politicians, described the budget session as illegitimate and unconstitutional. They said the prime minister’s new government has no right to attend and discuss the budget before it wins parliament’s vote of confidence. Moreover, the budget was drafted by the previous government under Hariri, which resigned amid pressure from the street. Shortly before noon, more than half the 128-member parliament were present, giving the needed quorum for the session to begin, amid clashes between protesters and security forces in the area around the parliament. The Lebanese Forces, the Kataeb Party and a number of independent MPs boycotted the session. The new budget aims to reduce deficit to around 7 percent of gross domestic product, parliament budget committee chairman Ibrahim Kanaan said. That would be only a tiny drop from the planned deficit of almost 7.6 percent of GDP for last year, after a shortfall of 11.2 percent in 2018.
The last government had promised a deficit of just 0.6 percent for 2020, but Kanaan said that was now impossible as the unravellng economic crisis had caused projected revenues for the year to decrease.
Prime Minister-designate Hassan Diab attended the parliament session without any other member of his Cabinet. When pressed by members of al-Mustaqbal bloc whether he would adopt the budget drafted by the former Cabinet, Diab said: “Had we not adopted the budget we wouldn’t have come today.””There is nothing normal in Lebanon today and the economic and financial complications make us work quickly,” Diab said. Lebanon has one of the world’s highest public debts in the world, standing at more than 150% of gross domestic product. Growth has plummeted and the budget deficit reached 11% of GDP in 2018 as economic activities slowed and remittances from Lebanese living abroad shrank. The national currency, which has been pegged to the dollar since 1997, lost about 60% of its value in recent weeks, raising alarms among many Lebanese who have been losing their purchase power.
Legislator Salim Saadeh listed Lebanon’s financial and economic problems, ranging from the massive debt to the drop in the local currency. “We are like someone drowning in mud but at the same time standing in front of a mirror and brushing his teeth,” Saadeh said
Lebanon’s parliament passes 2020 budget as protests continue
The New Arab & agencies
Lebanon’s parliament on Monday passed the 2020 budget, state media said, as leaders struggle to redress a plummeting economy and address anti-establishment protests. Lebanon has since 17 October been gripped by a unified popular movement that toppled the government and created a three-month political vacuum until a new cabinet was announced last week. Thousands of soldiers, including special forces, as well as riot policemen were deployed on major roads in the capital and its suburbs as they attacked protesters who were demonstrating against the budget. Beirut committed in 2018 to slashing public spending as part of reforms to unlock more than $11 billion in desperately needed international aid. The new budget aims to reduce deficit to around 7 percent of gross domestic product, parliament budget committee chairman Ibrahim Kanaan said. That would be only a tiny drop from the planned deficit of almost 7.6 percent of GDP for last year, after a shortfall of 11.2 percent in 2018. The last government had promised a deficit of just 0.6 percent for 2020, but Kanaan said that was now impossible as the unravelling economic crisis had caused projected revenues for the year to decrease. In recent months, thousands of Lebanese have been laid off or seen their salaries slashed as the value of the Lebanese pound has fallen by more than a third on the parallel exchange market. Only 70 of the 128 members of parliament attended Monday’s vote, just days after Prime Minister Hassan Diab announced his new team, the state-run National News Agency said. The budget was passed with 49 lawmakers in favour, 13 against, and eight abstaining, the agency said. Diab, who attended the session but whose cabinet still needs to be approved by the legislature, said his team would not hamper the budget prepared by the former government.
Kanaan however said the new cabinet could carry out amendments.
Hariri on Budget Session: Mustaqbal Won’t Boycott or Obstruct Institutions
Naharnet/January 27/2020
Al-Mustaqbal Movement leader ex-PM Saad Hariri stressed Monday that al-Mustaqbal parliamentary bloc will not “boycott or obstruct” state institutions, defending the bloc’s decision to take part in a controversial parliament session that approved the 2020 state budget. “I stress to whom it may concern, and to anyone who is trying to seize the chance to fabricate campaigns, that al-Mustaqbal bloc will not be a tool for boycotting or obstructing institutions,” Hariri tweeted. “It performed its duty, did not evade its responsibilities and voiced its stance openly in parliament and under the constitution,” he added. “This is Rafik Hariri’s school and we will not abandon it no matter how hard the difficulties may get… When it is time for taking a decision that serves Lebanon’s interest we will take the appropriate decision,” the ex-PM went on to say. Al-Mustaqbal bloc had earlier issued a statement saying it had voted against the 2020 state budget bill out of its belief that “the numbers included no longer reflect reality.”“The economy is now different in size and quality compared to how it was when the previous government endorsed the draft budget,” it said. “The current government should have won the vote of confidence before taking part in a session debating the budget,” it added. The controversial session that was boycotted by several blocs and MPs, including those of the Lebanese Forces and the Kataeb Party. Only 49 legislators voted in favor of the state budget. The Democratic Gathering bloc meanwhile abstained from voting. The 2020 budget was drafted by the government of Saad Hariri, who resigned in late October in response to nationwide protests. Protesters, and some politicians, described the budget session as illegitimate and unconstitutional. They said the prime minister’s new government has no right to attend and discuss the budget before it wins parliament’s vote of confidence. Moreover, the budget was drafted by the previous government under Hariri, which resigned amid pressure from the street. Prime Minister-designate Hassan Diab attended the parliament session without any other member of his Cabinet. When pressed by members of al-Mustaqbal bloc whether he would adopt the budget drafted by the former Cabinet, Diab said: “Had we not adopted the budget we wouldn’t have come today.””There is nothing normal in Lebanon today and the economic and financial complications make us work quickly,” Diab said.
Diab Chairs Policy Meeting, Says Budget Approval Sends Positive Signal
Naharnet/January 27/2020
Prime Minister Hassan Diab on Monday presided over the fourth meeting of the ministerial panel tasked with drafting the Policy Statement of the new government. “PM Dr. Hassan Diab stressed at the beginning of the session that the approval of the state budget in parliament sends a positive signal domestically and externally, regardless of the reservations related to the circumstances of this budget and its content,” Information Minister Manal Abdul Samad said after the meeting. “PM Diab said the government was keen on facilitating the adoption of this budget in light of its vital importance for the continuity of the state’s work and out of commitment to the constitutional deadlines,” Abdul Samad added. “The PM underlined that the approval of the budget is a juncture that allows the government to focus its work on finalizing the Policy Statement, which should be completed as soon as possible. That’s why a series of consecutive meetings will be held this week to continue drafting the statement,” the minister went on to say. She revealed that the committee has conducted a first reading of the completed part of the draft, amending some articles and adding others related to the plans of some ministries. “The committee will continue to receive the work plans of all ministries over the next two days,” she added. Asked whether anything is “obstructing” the statement, Abdul Samad said: “Nothing is obstructing the Policy Statement and we are only taking our time on each point in order to meet the domestic and foreign demands.”
Jumblat: Budget Approval Better than Vacuum, Extrabudgetary Spending
Naharnet/January 27/2020
Progressive Socialist Party leader Walid Jumblat on Monday noted that “the step of approving the state budget is better than vacuum or extrabudgetary spending,” although the PSP-led Democratic Gathering bloc has abstained from voting on the bill in parliament. “The government must propose serious reforms, topped by ones related to the electricity sector, its regulatory commission and the law on the judiciary’s independence,” Jumblat tweeted. “It’s the beginning of a long journey, while taking into consideration the forces and ghosts of the pasts who are in control of the government, which is something that is not promising,” the PSP leader added.
Sayyed at Parliament: This is Not Jamil al-Sayyed’s Govt.
Agence France Presse/Naharnet/January 27/2020
MP Jamil al-Sayyed on Monday stressed that Hassan Diab’s new government is not “Jamil al-Sayyed’s government,” denying media reports and political accusations that have suggested that he played a key role in its formation. “This is not Jamil al-Sayyed’s government as it is being said and I will speak about the issue during the confidence session,” Sayyed said in a speech before parliament during a session to vote on the 2020 state budget. “I wish we held a session prior to this one in order to discuss the current situation. This parliament is for the people,” the MP lamented. “Had this parliament and the successive governments felt the people’s suffering, we would not have reached the brink of explosion,” Sayyed added, referring to the country’s dire economic and financial crisis and the popular uprising that has been raging since October 17. Describing the approval of the 2020 budget, which was prepared by the resigned government, as a “crime,” the MP noted that “the anticipated revenues have become almost void due to the situation which has prevented communication between the state and the citizen.” “Accordingly, people have been given a grace period as of the middle of the year to pay their overdue fees,” he said. Sayyed also urged Speaker Nabih Berri to hold other sessions after the approval of the budget in order to discuss the demands of the protest movement. Parliament later approved the 2020 budget in a controversial session that was boycotted by several blocs and MPs. Protesters, and some politicians, described the budget session as illegitimate and unconstitutional. They said the prime minister’s new government has no right to attend and discuss the budget before it wins parliament’s vote of confidence. Moreover, the budget was drafted by the previous government under Hariri, which resigned amid pressure from the street. The former government had hopes to bring down the budget deficit to 7.6% of the GDP in 2019 year and to 6.5% in 2020.
President receives Ministers Akar and Najm, discusses ministries’ work
NNA/January 27/2020
President Michel Aoun devoted his before-noon meetings to follow up the work of Ministries. The President also tackled the obstacles facing Ministries, and ways to overcome them. President Michel Aoun met with the Deputy Prime Minister, and Minister of National Defense, Zeina Akar, and discussed with her the general situation and developments, in addition to the work of institutions affiliated to her Ministry. Numerous issues concerning the Lebanese army were also discussed. President Aoun met the Minister of Justice, Marie-Claude Najm, the head of the Supreme Judicial Council, Judge Souhail Abboud, and the head of “Shura” State Council, Judge Fadi Elias. The President discussed the work of judicial institutions especially in terms of activating courts and speeding up the issuance of judgements. Minister Najm indicated that the research dealt with the legal workshop, which the Ministry of Justice and the Supreme Judicial Council are working on preparing, in addition to combatting corruption, and independence of the judiciary. —–Presidency Press Office
Rahi tackles developments with Kataeb chief
NNA/January 27/2020
Maronite Patriarch Cardinal Bechara Boutros Rahi welcomed on Monday in Bkerke Head of the Lebanese Kataeb Party, MP Sami Gemayel, accompanied by Vice Head, former Minister Selim Al Sayegh and Dr Faraj Kerbaj. Discussions mainly focused on the latest developments on the local arena, and the Party’s stance vis-a-vis these developments as well as its proposed solutions and future vision.
Several Lawmakers Boycott Budget Session
Naharnet/January 27/2020
The Lebanese Forces Strong Republic parliamentary bloc on Monday boycotted a parliament session dedicated to discuss and later endorse the 2020 state budget. The bloc said it decided not to participate because the parliament convenes to discuss the budget before a confidence vote for the new chosen government, and because the people reject it. MP Faisal Kamari, Paula Yaacoubian, Naamet Ifrem, Jihad Abdul Samad and many others said they will refrain from attending. Lawmakers are scheduled to begin a two-day discussion and later approval of the state budget amid a crippling financial crisis.Lebanese security forces scuffled with protesters near the parliament building in downtown Beirut. Thousands of soldiers, including special forces, as well as riot policemen were deployed on major roads in the capital and its suburbs. They had sealed off the zone leading to parliament to prevent protesters from blocking the lawmakers’ path. Protesters blocked roads further afield in an effort to prevent lawmakers from reaching the building. The protesters have been demonstrating for more than three months against the ruling elite that has run the country since the end of the 1975-90 civil war. The protesters have rejected the new 20-member government of Prime Minister Hassan Diab, which was announced last week.
Injuries, Arrests as Beirut Protesters Seek to Disrupt Budget Session
Associated Press/January 27/2020
Security forces clashed with protesters in downtown Beirut on Monday, leaving several demonstrators injured and others detained. As the protests simmered outside parliament, lawmakers held a controversial session to discuss and later approve the state budget amid a crippling financial crisis.
Hundreds of soldiers, including special forces, as well as riot policemen were deployed on major roads in the capital and its suburbs. They had sealed off the zone leading to parliament to prevent protesters from barricading the lawmakers’ path. The protesters had in turn blocked roads further afield in an effort to stop lawmakers from reaching the building, but security forces managed to keep a single road open. Lebanon’s protest movement broke out on Oct. 17 over government plans to impose new taxes. Protest organizers say the movement will not accept anything less that the resignation of the ruling elite. Those elites have run the country since the end of the 1975-90 civil war, and protesters blame them for widespread corruption and mismanagement. The protesters have rejected the new 20-member government of Prime Minister Hassan Diab, which was announced last week. At one point, Monday’s rallies turned violent as protesters removed barbed wire from a road leading to parliament and were chased by riot policemen, who beat them with clubs. The protesters threw stones at the police, who detained about a dozen of them. The Lebanese Red Cross said at least 27 people were injured, including eight who were taken to hospitals. Over the past two weeks, downtown Beirut witnessed riots that left more than 500 civilians and policemen injured.
The 2020 budget, which was later approved in the session with only 49 out of 128 votes, was drafted by the government of former Prime Minister Saad Hariri, who resigned in late October in response to the nationwide protests. The tight security measures underscored lawmakers’ determination to hold the budget session. In November, thousands of protesters closed roads leading to parliament, forcing a postponement of a legislative session after most lawmakers weren’t able to reach the legislature. Protesters, and some politicians, have described the budget session as illegitimate and unconstitutional. They say the prime minister’s new government has no right to attend and discuss the budget before it wins parliament’s vote of confidence. Moreover, the budget being discussed was drafted by the previous government under Hariri, which resigned amid pressure from the street. Shortly before noon, more than half the 128-member parliament were present, giving the needed quorum for the session to begin. The Lebanese Forces, the Kataeb Party and a number of independent MPs boycotted the session. Diab attended the parliament session without any other member of his Cabinet. When pressed by members of Hariri’s bloc whether he will adopt the budget drafted by the former Cabinet, Diab said: “Had we not adopted the budget we wouldn’t have come today.”
“There is nothing normal in Lebanon today and the economic and financial complications make us work quickly,” Diab said.
In recent days, security forces set up concrete blast walls around parliament and the nearby government headquarters, known as the Grand Serail, to keep protesters from reaching them. Lebanon has one of the world’s highest public debts in the world, standing at more than 150% of gross domestic product. Growth has plummeted and the budget deficit reached 11% of GDP in 2018 as economic activities slowed and remittances from Lebanese living abroad shrank. The national currency, which has been pegged to the dollar since 1997, lost about 60% of its value in recent weeks, raising alarms among many Lebanese who have been losing their purchase power. The former government had hopes to bring down the budget deficit to 7.6% of the GDP in 2019 year and to 6.5% in 2020. With the financial crisis worsening since the protests began, it is appearing more difficult to bring down the deficit. Legislator Salim Saadeh listed Lebanon’s financial and economic problems, ranging from the massive debt to the drop in the local currency. “We are like someone drowning in mud but at the same time standing in front of a mirror and brushing his teeth,” Saadeh said
Lebanon’s bonds fall as debt restructuring decision looms
Reuters, London/Monday, 27 January 2020
Lebanon’s government bonds fell to fresh lows on Monday as traders waited on a possible government decision about how it will deal with its debt, including a $1.2 billion Eurobond maturing in March. An April 2021 issue shed 2 cents to 50.4 cents in the dollar, while an October 2022 bond
dropped 1.9 cents to 43.2 cents in the dollar, Tradeweb data showed. The sell-off preceded a possible government decision on whether its March bond – the next due for repayment – might be included in any debt restructuring. Hours after he was named, Finance Minister Ghazi Wazni last week said the government must decide on its approach to the $1.2 billion issue. “I suppose market sentiment may be leaning that they may be included [in any debtrestructuring],” said Giyas Gokkent, of JPMorgan Securities.
Heavy security in Beirut as parliament convenes on budget
The Associated Press, Beirut/Monday, 27 January 2020
Lebanese security forces scuffled Monday with protesters near the parliament building in downtown Beirut, where lawmakers are scheduled to begin a two-day discussion and later approval of the state budget amid a crippling financial crisis. Thousands of soldiers, including Special Forces, as well as riot policemen were deployed on major roads in the capital and its suburbs. They had sealed off the zone leading to parliament to prevent protesters from blocking the lawmakers’ path. Protesters blocked roads further afield in an effort to prevent lawmakers from reaching the building. The protesters have been demonstrating for more than three months against the ruling elite that has run the country since the end of the 1975-90 civil war. The protesters have rejected the new 20-member government of Prime Minister Hassan Diab, which was announced last week. During the two-day session, parliament is scheduled to discuss the 2020 budget that was drafted by the government of former Prime Minister Saad Hariri, who resigned in late October in response to the nationwide protests. The tight security measures underscored determination to hold the two budget sessions despite the protests. In November, thousands of protesters closed roads leading to parliament, forcing a postponement of a legislative session after most lawmakers weren’t able to reach the legislature. In recent days, security forces have set up concrete blast walls around parliament and the nearby government headquarters, known as the Grand Serial, to keep protesters from reaching them. Over the past two weeks, downtown Beirut witnessed riots that left more than 500 civilians and policemen injured. The protest movement broke out on Oct. 17 over government plans to impose new taxes. Protest organizers say the movement will not accept anything less that the resignation of the ruling elite, who they blame for widespread corruption and mismanagement. Lebanon has one of the world’s highest public debts in the world, standing at more than 150 percent of gross domestic product. Growth has plummeted and the budget deficit reached 11 percent of GDP in 2018 as economic activities slowed and remittances from Lebanese living abroad shrank. The national currency that has been pegged to the dollar since 1997 lost about 60 percent of its value in recent weeks, raising alarms among many Lebanese who have been losing their purchase power.
The former government had hopes to bring down the budget deficit to 7.6 percent of the GDP in 2019 year and to 6.5 percent in 2020.
Diab Says Won’t Obstruct Budget Prepared by Previous Cabinet
Naharnet/January 27/2020
Prime Minister Hassan Diab said on Monday that his government is not going to obstruct the 2020 state budget prepared by the former government of PM Saad Hariri who resigned in October. Speaking at the beginning of the parliament session dedicated to discuss and later approve said budget, Diab said: “Nothing is going normally in Lebanon today, the current economic and financial complications compel us to behave out of necessity and logic.” Referring to the absence of ministers, he said “the government can not collectively appear before the parliament before the vote of confidence, but it will not hinder a budget prepared by the former government.” MP Samir el-Jisr and several other MPs of al-Mustaqbal Movement, urged the PM to announce whether he is going to “adopt” the controversial budget ever prepared by the government of his predecessor PM Saad Hariri. Diab’s government was formed last week but it still has to gain a vote of confidence in parliament.
Top global banking agency proposes an IMF bailout
TK Maloy/Annahar/January 27/2020
By many expectations, the country and the economy are expected to collapse by June at the latest given no intervention or comprehensive plan on the part of the new government, according to a number of expert commentators.
BEIRUT: The Institute of International Finance, a prestigious global association of banks and other financial institutions issued a report Sunday calling for a number of drastic reforms, including an IMF bailout, to halt Lebanon’s collapsing economy.
By many expectations, the country and the economy are expected to collapse by June at the latest given no intervention or comprehensive plan on the part of the new government, according to a number of expert commentators. The Central Bank will have potentially exhausted its current account funds by then because of the heavy bond repayments required.
In an executive summary, IIF analysts, including Garbis Iradian, Chief IIF Economist-MENA, suggest an action plan of which follows is an executive summary.
The reforms proposed by the IIF “will be necessary or should be considered to lift Lebanon out of the current crisis.”Reducing interest rates; restoring the health of the banking system; sustaining fiscal adjustment; reforming EDL; seeking an IMF program to anchor reforms and secure additional financing; considering debt rescheduling; unifying the exchange rates under stable conditions and position of strength; privatizing the two mobile companies and other public entities to reduce public debt; reducing corruption and establishing a social safety fund.
“Lebanon’s economic deterioration has accelerated dramatically: we (IIF) estimate a contraction of 3.8 percent in 2019, including more than a 10 percent output decline in Q4; the fiscal deficit has widened to 11.6 percent of GDP; public debt has increased to 166 percent of GDP; inflation has increased significantly, and layoffs and forced wage decreases have spiked,” according to the full IIF report.
The report added that to restore growth, the government will need additional capital inflows from official sources.
Expanding on the executive summary, the IIF noted in the full report that ”given the authorities’ track record over the past three decades, it is possible the actual reforms will fall short of what is necessary to restore macroeconomic stability. “
The IIF has projected external financing needs at $24 billion over 2020-2024. In addition to the $11 billion of loans from CEDRE, the new the government will need to enact some of the following reforms, including an IMF program (the IIF estimated $8.5 billion) to provide a strong policy framework and catalyze additional financing ($13 billion) to boost the country’s FC reserves.
Additionally, Lebanon should examine the possibility and consequences of re-profiling its domestic public debt.
Also, fiscal reforms need to be initiated to address deep-seated spending rigidities, eliminate the budget transfers to Electricité du Liban (EDL), and raise revenues in ways that minimize the negative impact on the poor, including fighting tax evasion.
The IIF “welcomes” the move by the Central Bank of Lebanon (BDL) and commercial banks to reduce interest rates on all deposits, loans, and public debt. “Continued action on this front would improve liquidity in the banking sector and increase confidence, which would encourage investment and ease the pain of fiscal adjustment.”According to the IIF report, banks’ financial health will be strengthened through recapitalization and resolution of impaired assets, which will be critical to regaining confidence and support recovery. Privatization should be part of the economic plan of the new government with a view to increasing investment, reducing the stock of government debt, and improving efficiency. However, the establishment of better oversight and accountability mechanisms is an essential precondition. Other structural reforms should include fighting rampant corruption and improving the business environment.
Such adjustments can be difficult, and Lebanon is already experiencing rising poverty and inequality. To protect those affected by the current crisis, a Social Fund could be established, financed by foreign grants and recovery of stolen public funds, according to the IIF report.
To reprise, so readers don’t interpret that this is a bailout as such – free money – if Lebanon calls for IMF/or World Bank assistance, the expectations are that state subsidies to EDL would be slashed, thus increasing the cost of electricity at the household level, there will likely be an increase in the VAT, and a variety of hard-hitting structural reforms would be enacted. Including cuts to government employment through attrition – when a civil servant retires they would not be replaced. Both the IIF and the World Bank provide assistance based on heavy conditionally and loan terms, in which the freewheeling political class of Lebanon will require a new discipline in spending.
Last weekend the new Finance Minister Gazi Wazni met with IMF alternative director from the IMF Sami Geadah on Saturday in what he termed a “courtesy visit,” this follows a Friday visit by Finance Minister Wazni with a delegation from the World Bank including regional director Saroj Kumar Jha. The minister alluded to talks elsewhere in the government on asking for multilateral assistance.
*The Institute of International Finance is the global association of the financial industry, with close to 450 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members, and foster global financial stability and sustainable economic growth.
IIF members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks.
US Holds Back from Sanctioning Non-Shiite Lebanese Officials after Hale Intervenes
Mohammed Choucair/Asharq/ Al Awsat/January 27/2020
The United States had been mulling the possibility of imposing sanctions against non-Shiite Lebanese officials who are closely allied with the Hezbollah party and have defended its policies before the international community, revealed a prominent Lebanese political source.
US Undersecretary for Political Affairs, David Hale, however, intervened to halt the sanctions, describing them as a “nuclear weapon” that would speed up Lebanon’s collapse, said the source. His intervention was interpreted as an attempt to allow these figures to reconsider their pro-Hezbollah positions. The government, which was unveiled last week after much political bickering, is dominated by Hezbollah ministers and its allies. This has fueled skepticism over the cabinet’s ability to attract much-needed foreign support to help Lebanon overcome its worst economic crisis in decades.
The source remarked that the international community’s welcoming of the formation of the cabinet does not mean that it will automatically receive financial aid. It had no choice but to welcome the government because the alternative would have been keeping Lebanon in a “prolonged and fatal” political vacuum. The international community is now awaiting Lebanon to fulfill its reform obligations as stipulated in the 2018 CEDRE conference, which will pave the way for it to help it resolve its economic and financial crises. International powers will in no way give Lebanon “free” aid without the introduction of any reforms, said the source. Officials have a high mountain to climb in restoring confidence in Lebanon given Hezbollah’s domination of the government. Attention will be turned to the new cabinet’s foreign policy. The new ministers, many of whom have dual Lebanese and American or European nationality, have informed ambassadors that the cabinet will adopt a moderate policy, explaining that the party is aware of the very fragile economic and financial situation Lebanon is enduring. The party will seek a moderate stance with Arab nations because it is in dire need of its help, especially since it will be the first to suffer if the situation in Lebanon continues to deteriorate. Prime Minister Hassan Diab also has the responsibility of rectifying relations with these countries after they lost their trust in Lebanon in wake of the damaging policies adopted by former Foreign Minister Gebran Bassil. The PM will also be tasked with reining in “hot-headed” ministers should they continue in blindly following Bassil, who acted as if Lebanon was part of the Iran-Syria “resistance axis”.
Lebanon: What Distinguishes Today
Hazem Saghieh/Asharq Al Awsat/January 27/2020
As soon as information about the new ministers of Hassan Diab’s government started to leak, a Facebook friend commented asking: ”would it be shameful to ask for the return of the previous government?” This comment is made even bitterer by the fact that this previous government had been brought down by the revolution, and that this was one of its first big achievements. This is not to say that we are destined for one of these two lousy possibilities, but to say that the current political configuration can no longer provide something better. They have no more tricks up their sleeve. However, the current government, which is being offered as a body that will salvage the nation, remains the worst of the worst.
The following have been ascribed to some of the new ministers: theft of public land by the sea, theft of artifacts, strongly representing the banking sector, smuggling diesel, lacking merits and having merits but those that are irrelevant to their post. The only positive aspect is that 6 of the ministers are women, but the women’s traits have turned their appointment into something negative on balance, which damages not only the government, but the noble demand itself as well.
Politically, the fact that this is “March 8’s government” is more important than anything else. It has been described as “Hezbollah’s government” and the political manner in which it chose to respond to Soleimani’s murder. It has also been reported that former Foreign Minister Gebran Bassil and Deputy and former General Director of General Security Jamil al-Sayed were its actual operational engineers. Mohammed Fehmi the new Interior Minister is very close to Sayed. Thus, as many have concluded, it resembles the governments that had been formed to confront Hariri during Lahoud’s era…
Before this, it was remarkable that the March 8 coalition did not manage to form this government, its own, easily. The process was problematized by a complex multifaceted struggle over shares and power-sharing, which the rejection of which is among the pillars of the revolution.
Here, we arrive at the central difference between the 1998-2005 period and today: the weakness of the leadership’s grip, which harnesses the contradictions and interests of it junior followers. This weakness expanded their “minor differences” and shares, giving them what had not been theirs in the previous era.
This is a list of some of the changes:
First of all, the top command of the “axis of resistance” in Tehran was powerful and rich at the time. This is no longer the case. Second, the same could be said about the second center in command in Damascus, which had a direct presence in Beirut before 2005, while it now requires unlimited regional and international aid to end its ongoing war. Third, both of the mentioned centers of command had a degree of harmony with the other regional powers, and this relative harmony provided a de facto acceptance of their influence. The opposite is true today, and curbing Iranian influence in Lebanon (and Iraq) has become a broadly supported demand. Fourth, while Hezbollah remains very powerful, it is financially poorer than it was. In addition, it is harder for it and more disorienting to confront some of the members of its own sect and nation, than to fight its familiar battles. Fifth, even the presidency is not the same: when Emile Lahoud, who lacked any popular support within his sect or nation, was president, authorization, and allegiance to big brother was total and absolute, and big brother’s confidence in him was also total and absolute. He was “in his pocket”. With Michel Aoun, authorization and allegiance remain in effect, of course, but Aoun is less trusted than his predecessor. Because of his popular base, as well as his political formation and past, there is continuous doubt over the persistence of his loyalty if the adequate conditions were to encourage him to “take a detour”. It is true that this is hypothetical until further notice, but the “axis of resistance” does not disregard such hated hypotheticals. Finally, we reach the premiership: with Omar Karami and Salim al-Hoss there was some kind of traditional cover. There is also the fact that it was generally accepted that al-Hoss was a man of integrity. With Hassan Diab, the process resembles manufacturing something from scratch. It will be his allies’ duty to give him the qualities and meanings of which they do not have much. In any case, the March 8 coalition will rule Lebanon today as it catches its breath. The popular revolution and its demands will multiply its sense of helplessness. The so-called “international community” will, through their expected repudiation of them, do the same. The financial and economic results will likely be disastrous.
So, we are in the midst of the decay of March 8 from a position of power and March 14 coalition’s corresponding decay from the position of opposition. The “program” of this decay is marching in the same place, accompanied by an increase in repression that replaces the misery of politics. The period 1998-2005 ended with a major crime that led to a major split. Today, the emergence of those who are inspired by North Korea as a model for salvation is not far-fetched.
Where Failure Is More Dangerous Than Coronavirus
Ghassan Charbel/Asharq Al Awsat/January 27/2020
If we wanted to abide by the old dictionary of totalitarian regimes, the outbreak of the Coronavirus would have been included in the category of state secrets and any talk or information about it would have been forbidden.
But we live in a world where such behavior is no longer possible. The world is interconnected and intertwined. Social media has made the cosmic village “secret-less.”China could have handed over this problem to a health department; or even tried to belittle its seriousness. But the Red Dragon chose to deal with the issue in a country-like manner, with responsibility towards its citizens and the world as well. Thus, the Communist Party’s Politburo Standing Committee was called to an urgent meeting chaired by the party’s Secretary-General Xi Jinping, although the number of deaths had not yet exceeded a dozen. The president himself contributed to giving the problem its true dimensions. He warned that the country was facing a “dangerous situation” due to the rapid spread of the viral pneumonia epidemic.
At the same time, he stressed that China can “win the battle.” Therefore, all the State’s capabilities, including scientific laboratories, have been mobilized to learn more about the nature of the virus and find the appropriate vaccine.
This issue would have been a catastrophe for China’s image had the country chosen to conceal it. But the Chinese president, who heads the second world’s greatest economy, realized that his country should act wisely for the sake of its citizens and the world. It is true that measures taken to prevent the spread of the virus have high economic prices. But nothing can be compared to the repercussions of silence. Imagine the reaction of the citizens, and the world, if they found out that China has failed to meet its responsibilities. Beijing treated the epidemic as its first enemy and chose to deal with transparency in a matter of concern and panic.
In parallel with the outbreak of the Coronavirus, the Arab journalist was following up on three thorny files: the escalating crisis in Iraq, Libyan developments in the wake of the Berlin conference, and popular protests in Lebanon. In the three files, the journalist found no reason to think about the presence of a state of institutions. Iraq’s political class dealt with protests calling for fighting corruption and establishing a full-fledged nation as a kind of pandemic.
Instead of listening to the pain of the Iraqis and deducing conclusions, the authorities denied the depth of the crisis and thought that stifling the protests could end the problem. The Chinese authorities started to act after the death of a number of people. But the decision-makers in Iraq did not find a way to deal with the death of more than five hundred protesters other than the approach that leads to more casualties.
The killing of Qassem Soleimani and Abu Mahdi al-Muhandis in Baghdad by the US forces added a very serious complication to the already existing obstacles. The US operation and the Iranian response to it added fuel to the fire, due to the state’s fragmentation. The Iraqis found themselves prisoners of a so-called “Iraqi scene”. Recent events have revealed that the political process that followed the overthrow of Saddam Hussein’s regime, at the hands of the Americans, did not result in the establishment of a natural state with natural institutions capable of facing problems and dangers.
Diseases of quotas and corruption took over constitutional texts and left the country at the mercy of the factions and the policies of interference. It is clear that Saddam Hussein’s policies plunged the country into a deep tragedy and that the mistakes of the US occupation compounded the problems of Iraq. But it is also obvious that Iraqi political and party forces have failed to establish the features of a normal country.
After the fall of Saddam, Iraq witnessed a wave of looting that exceeded that of Russia after the suicide of the Soviet Union. The new authority failed to draw lessons from harsh experiments that demonstrated the fragility of the new institutions, which was starkly confirmed by the scandal of Mosul’s fall in the hands of ISIS. Here is Iraq, living under the weight of great turmoil and factional bickering. Neither firing rockets at the US embassy nor burning the tents of the protesters provides a solution. The Libyan despot left no institutions to build on. But the Libyans themselves missed the opportunity to shape a normal country that would help them compensate for four lost decades. Internal failures deepened, while the thirst for Libya’s oil amplified foreign interferences. Despite the wide international presence at the “Berlin Clinic”, there are some who fear that the inability of the Libyans to sit under one roof and to formulate a road map for building the state will prolong the tragedy and exacerbate the dangers for Libya and its neighbors.
The Lebanese failure does not need evidence. The Lebanese people disagree on many things, but they agree that today, in the republic of bankruptcy and collapse, they are subjected to unprecedented humiliation that was never seen in the worst chapters of the war.
A corrupt political class has threatened the pillars of Lebanon’s stability and economy, including the banking sector, and has failed to act in a timely manner to prevent slipping into the current abyss. It is evident that neither the exchange of accusations nor the burning of protesters’ tents provides a solution. We don’t want to depreciate the size of external interventions and the role they play. But the internal forces did neither act with the logic of the state, nor did they demonstrate their wish to build a natural country, where all citizens live under the law. Just a quick reading of the costs of failure in Iraq, Libya, and Lebanon shows that the prevailing virus of failure to build a natural state is more dangerous than the Coronavirus.
