Lebanon preparing public debt reform plan, assures on Eurobonds

Lebanon has been without a new government since May as politicians continue to wrangle over the make-up of a new national unity cabinet. (AFP)
Updated 10 January 2019
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Lebanon preparing public debt reform plan, assures on Eurobonds

  • Lebanon has the third largest public debt-to-GDP ratio in the world at around 150 percent and has suffered from years of low economic growth
  • Fitch and Moodys both last month revised the outlook on Lebanon to negative from stable

BEIRUT: Lebanon is working on a public finance reform plan and studying ideas for managing the debt and its structure, the finance minister told Reuters on Thursday, after he was cited saying the plan included restructuring of public debt.
Ali Hassan Khalil's remarks to al-Akhbar newspaper about debt restructuring sparked a heavy sell-off in Lebanon's dollar-denominated debt. Some dropped more than 2 cents in the dollar to trade at their weakest in weeks.
In comments to Reuters, Khalil said Lebanon was committed to its Eurobond issuances and those that hold them, and would not violate any of their terms. He said "ideas for the management of the debt and its structure are still under study".
Lebanon has the third largest public debt-to-GDP ratio in the world at around 150 percent and has suffered from years of low economic growth. Its political leaders have been unable to form a new government since a May election.
Khalil told al-Akhbar the ministry was "preparing a financial correction plan including restructuring of public debt" saying this was needed to spare Lebanon "dramatic developments". The details had not been revealed to anyone, he added.
"The public debt cannot continue in this way," he said.
Asked by Reuters about the report, Khalil said the plan was "part of a reform project" for the public finances, starting with measures set out at a Paris donors' conference last year where Lebanon vowed to bring down its deficit.
"It is a voluntary financial correction plan being prepared in the ministry to avoid anything worse happening," he said. He said no steps had been taken yet and the aim was to have the plan ready for when a new government is formed.
The International Monetary Fund urged Lebanon in June to carry out "an immediate and substantial fiscal adjustment" to improve debt sustainability.
Fitch and Moodys both last month revised the outlook on Lebanon to negative from stable.
Lebanon's dollar-denominated debt tumbled in early trading.
Some issues - such as the 2020 and the 2025 bond dropped more than 2 cents in the dollar. The yields in the 2020 bond spiked to as much as 13.3 percent.


What led to the genocide of Armenians by the Ottomans

Updated 6 min 38 sec ago
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What led to the genocide of Armenians by the Ottomans

  • Regional affairs expert explains the reasons behind the carnage
  • The Ottoman Empire was known during the 19th and early 20th centuries as the sick man of Europe

RIYADH: Eyad Abu Shakra, a Middle East specialist, said there were three things that needed to be considered when researching how the Ottoman Empire handled Armenia during the First World War. Approaching the subject in this way made it possible to understand the violent repression of non-Muslim minorities in the Ottoman Empire, especially the Armenians.

Speaking to Arab News on Tuesday, Abu Shakra said the first point was related to Armenian history and heritage. They were among the first people to convert to Christianity, which was the dominant religion in Anatolia prior to Islam. The majority of Armenians belong to the Armenian Orthodox Church, which is one of the oldest churches in the world. It was founded in the first century A.D. by St. Thaddeus and St. Bartholomew, two of Jesus Christ’s disciples.

Abu Shakra said the second point was related to the “Eastern question,” a reference to the final decades of the Ottoman Empire and the mounting pressure it faced from European powers that were competing to carve out their own territories.

He said the historical roots of the Eastern question dated back to the 16th century, when Sultan Suleiman the Magnificent and Emperor Francis I reached an understanding by which France was granted special status as protector of the non-Muslim minorities in the Ottoman Empire, which was at the time at the height of its power.

But what started as a generous grant bestowed by a powerful state in the 16th century, became in the 19th century a tool of European pressure, and impositions from Christian powers on a weakened Ottoman state. This imbalance was reflected in the military losses of the Ottomans at the hands of the Europeans.

The Ottoman Empire was known during the 19th and early 20th centuries as the sick man of Europe. 

The worst setbacks were during the Russo-Ottoman war of 1768-1774, when the Ottoman Empire lost territories in the northern Black Sea region. The Ottoman decline climaxed by the end of the 19th century, when they lost much of the Balkans to separatist Serbs and Bulgarians.

“The Eastern question was finally answered after the First World War with the total collapse of the Ottoman Empire, which was forced to sign the Treaty of Sevres and then the Treaty of Lausanne. It gave up its claims to the Balkans and the Middle East. New states came into existence, such as Serbia, Bulgaria, and Turkey which was established in Anatolia, Istanbul and the Straits, while other territories came under direct rule of the allied victors,” said Abu Shakra.

The third point, according to Abu Shakra, lay in the Ottoman reforms that started during the reign of Sultan Abdul Majid I and continued until the First World War in 1914. For a long time the Ottoman Empire occupied swathes of territory across the continents of the ancient world. It included diverse populations and religions and this great power had an influential role in world politics. However, from the 18th century onward it became a decaying power.

The European powers, on the other hand, were on the rise despite their rivalries. So while the Ottoman state bureaucracy and military deteriorated, its army suffered from defeats in various wars that it fought on various fronts, draining the empire’s resources. 

These defeats made the Ottoman intelligentsia consider going through reforms to save whatever could be saved and modernize the empire.  This reform movement made important achievements, but it was argued by conservatives that the internal fabric could not withstand the pace of reforms. This tension became a pretext for questioning the validity of the reforms which increased the confidence of non-Muslims (including Armenians), non-Turks (especially Arabs), who started to have a growing sense of identity. This friction was encouraged by the European powers, who had been interfering in the affairs of the Ottoman Empire.

As a result, Sultan Abdul Hamid II came to power representing the conservative nationalist line, which was apathetic to the aspirations of non-Turks, especially the European ones. Although Abdul Hamid was removed from power after 30 years, the theater was prepared for the “Armenian Genocide” during the years of the First World War.