New Lebanon government calls for ‘painful economic reforms’

Lebanese Prime Minister Saad Al-HarirI heads a meeting to discuss a draft policy statement at the governmental palace in Beirut. (Reuters)
Updated 07 February 2019
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New Lebanon government calls for ‘painful economic reforms’

  • State jobs hiring freeze as Lebanon tightens belt
  • Statement sets the main policy objectives of Prime Minister Saad Al-Hariri's government

BEIRUT:  Lebanon is to freeze hiring for state jobs as it embarks on a program of economic reform described as “difficult and painful.”

The halt to new government employment “in all its forms” will last throughout 2019, followed by four years of replacing only half the number of people who retire, and on condition that strict new deficit reduction targets are met.

A draft government policy statement, parts of which were leaked on Wednesday, sets the main policy objectives of Prime Minister Saad Hariri’s national unity government, which was formed last week after nine months of wrangling over ministerial appointments.

The statement commits to bringing down the debt-to-GDP ratio by boosting the size of the economy and reducing the budget deficit. The government is committed to a “financial correction” equal to at least 1 percent of the GDP a year over five years.

This would be achieved by boosting revenues and cutting spending, starting with transfers to the state-run power company, which the World Bank has described as a “staggering burden” on the public finances.

Information Minister Jamal Al-Jarrah said the government was not considering tax increases. There were no major points of contention over the policy statement and it was expected to be approved by the government on Thursday, he said. “The atmosphere was very positive and there was no dispute about any point.”

Hariri’s adviser Nadim Al-Mulla told Arab News: “The government will implement reforms on the restructuring of the electricity and water sector, and tackle corruption.

“Most of the measures aim to reduce the deficit by reducing expenditure. The reduction will affect all ministries without exception and will include administrative expenses.”

The policy statement also said the government would continue the policy of exchange rate stability, as a priority for “social and economic stability.” The Lebanese pound has been pegged to the US dollar for over two decades.

Lebanon has some of the world’s worst debt and balance-of-payments ratios but has avoided financial disaster, confounding critics who have warned for years of debt defaults and a collapse of the pound; all have failed to materialize.

Nevertheless, pessimists were out in force on Wednesday. The Lebanese economy was “an unsustainable story over the medium term,” said Kevin Daly of Aberdeen Standard Investments.

“Having a government in place, that’s important, but they need to address key vulnerabilities and the big one is in the electricity sector — that plus no growth.”


RBS says Saudi bank merger boosts its core capital

Updated 16 June 2019
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RBS says Saudi bank merger boosts its core capital

  • RBS had a 15.3% interest in Alawwal bank
  • The changes would boost the banks CET1 core capital ratio by 60 basis points

Royal Bank of Scotland (RBS) said on Sunday the completion of a merger between Alawwal bank and Saudi British Bank would lead to RBS shedding $5.9 billion of risk weighted assets and boost its core capital.
RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40% equity stake in Alawwal bank, the British bank said in a statement. RBS also had an interest equivalent to a 15.3% stake in Alawwal bank.
RBS said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of almost $503 million and a reduction in risk weighted assets of nearly $5 billion.
RBS also said the deal would extinguish legacy liabilities of almost $377.
The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.
The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.
RBS, which was rescued in 2008 with a nearly $57 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.