Crisis-hit Lebanon stumbles toward first debt default

A handout picture provided by the Lebanese photo agency Dalati and Nohra shows Lebanon's President Michel Aoun (C) heading a ministerial council at the presidential palace in Baabda, east of the capital Beirut on March 7, 2020. (AFP)
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Updated 08 March 2020

Crisis-hit Lebanon stumbles toward first debt default

  • Country has been hit by severe liquidity crunch and months of anti-government protests

BEIRUT: Lebanon appeared Saturday to be headed for its first debt default as top officials indicated they opposed making an upcoming bond repayment amid a spiralling financial crisis.
The country, hit by a severe liquidity crunch and months of anti-government protests, was due to decide Saturday whether to repay a $1.2-billion Eurobond maturing on March 9.
The president, prime minister and senior finance officials “agreed to support the government in any decision regarding debt management, with the exception of a payment of debt maturities,” the presidency said in a statement.
That was widely seen as a signal that officials are leaning toward defaulting on the payment due next week.
A cabinet meeting was under way to decide on a course of action and Prime Minister Hassan Diab was due to address the public at 1630 GMT.
He was expected to announce a series of belt-tightening measures to steer Lebanon out of crisis, political sources said.
The presidency on Monday said an economic rescue plan would include “financial, administrative and banking reforms,” without providing additional details.
Lebanon’s debt burden, long among the largest in the world, is now equivalent to nearly 170 percent of its gross domestic product (GDP).
Despite a series of crisis, the country has never before defaulted, but in recent months it has grappled with its worst economic turmoil since the 1975-1990 civil war.
Foreign currency inflows have slowed, Lebanon’s pound has plunged and banks have imposed tough restrictions on dollar withdrawals and transfers.
According to Marwan Barakat, head of research at Bank Audi, Lebanese banks owned $12.7 billion of the country’s outstanding 30 billion Eurobonds as of the end of January.
The central bank held $5.7 billion and the remaining were owned by foreign creditors, he said.
According to local media reports, Lebanese banks have recently sold a chunk of their Eurobonds to foreign lenders.
Local banks, which own a chunk of the Eurobonds maturing on March 9, have argued against a default, saying it would pile added pressure on a cash-strapped banking sector and compromise Lebanon’s ties with foreign creditors.
Lawmakers, most notably those representing the Shiite Amal and Hezbollah movements, have advocated debt restructuring to preserve plummeting foreign currency reserves.
Anti-government demonstrators who have remained on the streets since October have also lobbied against repayment, fearing a depletion of reserves could further limit access to their savings.
“We shouldn’t have to pay the price of government shortcomings,” said Nour, a 16-year-old demonstrator, during a rally outside central bank headquarters in Beirut.
Lebanon’s sovereign debt rating slid into junk territory long ago, but investor confidence has fallen further since the mass protests erupted.
Credit rating agencies have warned of further downgrades in the event of a default, but economists have stressed the need to protect Lebanon’s foreign currency reserves.
Jad Chaaban, an economics professor at the American University of Beirut, blamed the political class for Lebanon’s predicament, accusing them of decades of corruption.
“This ‘catastrophe’ or ‘fireball’ is the creation of a failed and criminal political class that has lied and robbed for more than 30 years,” he said on Facebook.
He called on officials to restructure the debt and introduce an economic rescue plan that would protect modest depositors.
Diab met last month with a delegation from the International Monetary Fund to discuss how to tackle the country’s spiralling economic crisis.
The premier asked the Washington-based crisis lender for advice, but has yet to ask for financial assistance.
Barakat at Bank Audi said IMF assistance was necessary.
“Lebanon needs first and foremost an imminent debt restructuring plan within the context of a comprehensive plan for debt management,” he told AFP.
“The best is to have such a plan under the umbrella of the IMF for international financial assistance to materialize.”
The Lebanese pound, which has been pegged to the dollar since 1997, has plummeted on the parallel market, amid soaring inflation and unemployment.
The World Bank has warned of an impeding recession that may see poverty rates rise drastically.

New Daesh leader was informant for US, says counter terrorism report

Updated 18 September 2020

New Daesh leader was informant for US, says counter terrorism report

  • CTC said it is “highly confident” Al-Mawla became the new leader of Daesh after the previous leader, Abu Bakr Al-Baghdadi, was killed

NEW YORK: The man widely believed to be the new leader of Daesh was once an informant for the US, according to a new report from the Combating Terrorism Center (CTC), a research body at the US military academy of West Point in New York.

“Stepping Out from the Shadows: The Interrogation of the Islamic State’s Future Caliph” is based on Tactical Interrogation Reports (TIRs) — the paper trail the US military creates when enemy fighters are detained and interrogated — from Al-Mawla’s time in captivity in the late 2000s.

Before his release in 2009, Al-Mawla named 88 extremists involved in terrorist activities, and the information he divulged during his interrogations led US forces in the region to successfully capture or kill dozens of Al-Qaeda fighters, the report claims.

The CTC said it is “highly confident” Al-Mawla became the new leader of Daesh after the previous leader, Abu Bakr Al-Baghdadi, was killed in a US air raid in Syria in October 2019.

Although Daesh announced that a man called Abu Ibrahim Al-Hashimi Al-Qurashi was Baghdadi’s successor, US officials have also stated that Al-Qurashi’s true identity is actually Al-Mawla — also known as Hajj Abdullah.

Before joining Daesh, Al-Mawla is believed to have been the deputy leader of Al-Qaeda.

While details about the operation resulting in his capture are scarce, the TRIs reveal that he was captured on January 6, 2008.

The following day, US Central Command announced the capture of a wanted individual who “previously served as a judge of an illegal court system involved in ordering and approving abductions and executions.”

In his interrogations, Al-Mawla offered up details of terrorist plots to his interrogators, while minimizing his own involvement. He identified many jihadists by name and offered descriptions of their roles in the terrorist organization and details of their involvement in attacks on US-led coalition forces during the 2003 invasion of Iraq.

Al-Mawla — a former officer in Saddam Hussein’s army and once Baghdadi’s speechwriter — emerges from the TIRs as a mysterious personality with a vague past, whose ethnicity could not be determined with certainty. The statements in the reports are rife with contradictory elements and open to a wide range of interpretations. As the authors point out in their introduction: “It is incredibly difficult to ascertain whether what Al-Mawla divulges regarding himself or ISI (the forerunner of Daesh) as an organization is true.”

Details of the specific demographics of Al Mawla’s birthplace of Al-Muhalabiyyah in Iraq’s Tal Afar district are sketchy, but it is generally accepted to have a predominantly Turkmen population. The authors of the report point out that some sources have suggested “this could pose legitimacy problems for him because (Daesh) mostly has Arabs in its senior leadership echelons,” but add that at least two other senior members of the group were reported to have been Turkmen.

Al-Mawla also claimed to have avoided pledging allegiance to ISI because he was a Sufi. The report’s authors cast doubt on that claim, given his quick rise to prominence in the terrorist group and the fact that ISI and Daesh branded Sufism as heresy.

But the authors do believe the TRIs give some valuable insights into Al-Mawla’s personality.

“The fact that he detailed activities and gave testimony against (fellow jihadists) suggests a willingness to offer up fellow members of the group to suit his own ends,” they wrote. “The amount of detail and seeming willingness to share information about fellow organization members suggests either a degree of nonchalance, strategic calculation, or resignation on the part of Al-Mawla regarding operational security.

“He appears to have named individuals in some capacity across all levels of the organization, while describing some individuals in some detail,” they continued.

The US Department of Justice has offered a $10million reward for information about Al-Mawla’s identification or location.