Lebanon is plagued by an economic crisis that the World Bank considers to be one of the worst economic crises of our time, but authorities have not yet taken international remedies.
The financial collapse began in 2019 and Lebanon defaulted last year.
Politicians have been unable to enact significant reforms to save the Mediterranean nation, and many have blamed the ruling class and central bank policies for crashing.
What is slowing the progress of negotiations with the International Monetary Fund (IMF) to enter into agreements and unlock significant donor funds?
How bad is the crisis?
Lebanon’s GDP is projected to rise from about $ 55 billion in 2018 to $ 20.5 billion in 2021, and the World Bank says it is “usually related to conflicts and wars.” Negotiations with the IMF began in May 2020, but two months later, they were stalled in the debate over the magnitude of economic loss.
Negotiations resumed in September this year after a new government led by Prime Minister Najib Mikati was formed.
Lebanese authorities have not yet submitted a negotiation plan.
However, according to Deputy Prime Minister Saade Chami, who heads the IMF negotiation team in Lebanon, it has since agreed that the financial sector will lose about $ 69 billion.
The Lebanese pound has lost more than 90% of its value in two years, with four in five Lebanese living below the UN poverty threshold.
The official value of the pound is still $ 1,507 per dollar, but central banks have adopted multiple exchange rates to counter the devaluation in the black market. Central bank governor Riad Salame said unification of various interest rates would be “impossible” without the IMF’s agreement and political consensus, with $ 12 to $ 15 billion to start a recovery. He added that it was necessary.
What’s on the table?
Lebanese officials met with the IMF delegation in early December to discuss “economic policies that are an integral part of the funding program that Lebanon can receive,” Cami told AFP.
He added that the restructuring of Lebanon’s banking sector-the long-standing demand for donors-was one of the topics discussed.
“We need to work with the IMF to prepare a comprehensive economic recovery plan that will be sent to the (IMF’s) funding committee for approval,” Cami said.
The Lebanese government, which has not met since October due to political controversy over the fate of investigating the Beirut port explosion in August 2020, must also approve the agreement, Chami added.
He said Lebanon could see “concrete results” as soon as January, but warned that the government “must show that it is committed to reform” before reaching an agreement. did.
The Lebanese Prime Minister said Tuesday that the first official meeting with the IMF would take place on January 15.
The IMF delegation during the visit could see the government’s progress and close the deal back in early February, Mikati added.
Whether to audit?
Central bank audits are one of the greatest requirements of international donors and are widely seen as a prerequisite for IMF agreements.
The Alvarez & Marsal (A & M) company began auditing in September 2020, but was forced to withdraw two months later because the central bank was unable to deliver the required data.
In October of this year, Lebanese President Michel Aoun announced that the company would resume work and will submit a report to the government next month.
Former deputy governor-general of the central bank, Nacelle Saidy, suggested that the IMF would like to consider an audit, but Cami said no request had been made yet.
“I don’t know if a court audit or audit will be part of a potential IMF program,” Chami said.
However, according to Sidi, the potential IMF agreement will eventually bring other donors, such as the World Bank and the Gulf Arab countries, who may require it as a prerequisite for assistance.
“We need to understand what’s happening inside the central bank,” Saidy said. “There is a complete lack of transparency.”
An important issue for Sidi is the actual value of central bank reserves and the actual value of financial sector losses.
“I don’t seem to be willing to conduct a court audit,” he said, adding that “the bottom line is that the IMF is looking for a promise of good governance first and foremost.”
http://www.gulf-times.com/story/707138/Slow-progress-as-Lebanon-awaits-IMF-economic-deal Lebanon is waiting for the IMF’s economic agreement, slow progress