Lebanon finance minister urges new reforms after Moody’s report

Lebanese Finance Minister Ali Hassan Khalil holds a news briefing in Beirut. (Reuters)
Updated 14 December 2018

Lebanon finance minister urges new reforms after Moody’s report

  • Lebanon credit default swaps surge
  • Political wrangling adds to fiscal woes

BEIRUT: Lebanon’s finance minister said on Friday that a decision by Moody’s rating agency to change the country’s outlook to negative from stable proved the need to form a government and launch reforms.
Moody’s changed Lebanon’s outlook on Thursday while affirming its B3 rating, reflecting what it called an increase in risks to the government’s liquidity position and the country’s financial stability.
Saddled with a stagnant economy and the world’s third-highest rate of debt as a proportion of gross domestic product, Lebanon is also mired in political wrangling, with rival parties unable to form a government since May’s parliamentary election.
“Moody’s report today... confirms the importance of forming a government and starting reforms to restore confidence, reduce risks and reduce the deficit,” Finance Minister Ali Hassan Khalil wrote in a tweet.
“This is possible now, but we may lose the opportunity in months if the outlook remains negative,” he added.
The cost of insuring Lebanese sovereign debt against default this week rose to its highest level since the global financial crisis of 2008.
Overnight interbank rates for Lebanese pounds hit a 2018 high of 75 percent on Thursday. Two sources Reuters spoke to on Friday familiar with the rate said it had stayed at that level, while two others said it had dropped a bit.
The rates have not been this high since November 2017, when Prime Minister Saad Al-Hariri announced, and then rescinded, his resignation in a declaration that Saudi Arabia was widely believed to have coerced him into making.
“Once you have a government, it will have a positive impact on the market. Demand for dollars will decrease and things will go down again to the normal situation,” said one trader.

Davos organizer WEF warns of growing risk of cyberattacks in Gulf

Updated 16 January 2019

Davos organizer WEF warns of growing risk of cyberattacks in Gulf

  • Critical infrastructure such as power centers and water plants at particular risk, says expert
  • Report finds that unemployment is a major concern in Bahrain, Egypt, Morocco, Oman and Tunisia

LONDON: The World Economic Forum (WEF) has warned of the growing possibility of cyberattacks in the Gulf — with Saudi Arabia, the UAE and Qatar particularly vulnerable.

Cyberattacks were ranked as the second most important risk — after an “energy shock” — in the three Gulf states, according to the WEF’s flagship Global Risks Report 2019.

The report was released ahead of the WEF’s annual forum in Davos, Switzerland, which starts on Tuesday.

In an interview with Arab News, John Drzik, president of global risk and digital at professional services firm Marsh & McLennan said: “The risk of cyberattacks on critical infrastructure such as power centers and water plants is moving up the agenda in the Middle East, and in the Gulf in particular.”

Drzik was speaking on the sidelines of a London summit where WEF unveiled the report, which was compiled in partnership with Marsh and Zurich Insurance.

“Cyberattacks are a growing concern as the regional economy becomes more sophisticated,” he said.

“Critical infrastructure means centers where disablement could affect an entire society — for instance an attack on an electric grid.”

Countries needed to “upgrade to reflect the change in the cyber risk environment,” he added.

The WEF report incorporated the results of a survey taken from about 1,000 experts and decision makers.

The top three risks for the Middle East and Africa as a whole were found to be an energy price shock, unemployment or underemployment, and terrorist attacks.

Worries about an oil price shock were said to be particularly pronounced in countries where government spending was rising, said WEF. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil — that is, the price required to balance the national budget — rise to $88 a barrel, 26 percent above the IMF’s October 2017 estimate, and also higher than the country’s medium-term oil-price target of $70–$80.

But that disclosure needed to be balanced with the fact that risk of “fiscal crises” dropped sharply in the WEF survey rankings, from first position last year to fifth in 2018.

The report said: “Oil prices increased substantially between our 2017 and 2018 surveys, from around $50 to $75. This represents a significant fillip for the fiscal position of the region’s oil producers, with the IMF estimating that each $10 increase in oil prices should feed through to an improvement on the fiscal balance of 3 percentage points of GDP.”

At national level, this risk of “unemployment and underemployment” ranked highly in Bahrain, Egypt, Morocco, Oman and Tunisia.
“Unemployment is a pressing issue in the region, particularly for the rapidly expanding young population: Youth unemployment averages around 25 percent and is close to 50 percent in Oman,” said the report.

Other countries attaching high prominence to domestic and regional fractures in the survey were Tunisia, with “profound
social instability” ranked first, and Algeria, where respondents ranked “failure of regional and global governance” first.

Looking at the global picture, WEF warned that weakened international co-operation was damaging the collective will to confront key issues such as climate change and environmental degradation.