Lebanon banks reject rescue plan as government asks IMF for help

Lebanese police stand outside the entrance of the Association of Banks in downtown Beirut, Lebanon on November 1, 2019. (Reuters/File Photo)
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Updated 01 May 2020

Lebanon banks reject rescue plan as government asks IMF for help

  • The rescue plan, approved by Diab’s government on Thursday, sets out tens of billions of dollars in financial sector losses

BEIRUT/LONDON: An economic rescue plan that will form the basis of Lebanon’s talks with the International Monetary Fund (IMF) was panned by banks on Friday as one that would “further destroy confidence” in the country.
The comments, which could hold sway with the IMF given banks are among the largest holders of Lebanon’s debt, coincided with Beirut signing a request for assistance from the Fund on Friday in what Prime Minister Hassan Diab described as “a historic moment in the history of Lebanon.”
The rescue plan, approved by Diab’s government on Thursday, sets out tens of billions of dollars in financial sector losses and tough measures to claw out of a crisis that has seen the currency crash, unemployment soar, Lebanon default on its sovereign debt and street protests.
Some economists and diplomats welcomed the plan as a critical first step to recovery, but they were skeptical that ambitious reforms to cut public sector spending and overhaul the banking sector could be enacted after years of feet dragging.
“This means the onset of serious negotiations with the IMF so this is very important and good news because it removes a lot of uncertainty. Having said that, the issue in Lebanon has always been one of execution,” former economy minister Nasser Saidi said of the 53-page plan.
Lebanon’s banking association said it could in “no way” endorse a plan it was not consulted on despite being “a key part of any solution.”
The association called on members of parliament to reject it in part for infringing on private property rights. The plan does not require the parliament to pass it.
“As laid out in the Plan, the domestic (bank) restructuring will further destroy confidence in Lebanon both domestically and internationally ... (and) is likely to deter investment in the economy thereby hindering any recovery prospects,” the association’s statement said.
A central plank of the plan rests on covering financial sector losses of roughly $70 billion in part by a bank shareholder bail-in that would wipe out their capital and cash from large depositors that would be restored later.
The banking association called revenue and expenditure measures “vague” and not backed by a precise timeline, and said the plan did not address inflationary pressures that could lead to hyperinflation.
A source close to the banking sector said the IMF was likely to consult the banks on the rescue plan before moving forward. The source said the association was planning to present a plan of its own to the government in one to two weeks.

The government is hoping that with an IMF program in hand, foreign donors will release about $11 billion pledged at a Paris conference in 2018 which was tied to long-stalled reforms.
The rescue plan, which calls for an additional $10 billion in external support over five years, also forms the backbone of talks with foreign bondholders that have yet to start after Beirut defaulted on $31 billion in Eurobonds in March.
“In large part its a big PR move for the government as there was a feeling that the government was starting to lose control of the narrative. This plan shows they’re really trying to work toward something,” said Nafez Zouk, emerging markets strategist at Oxford Economics.
A rapid slide in the Lebanese pound, which has lost more than half its value since October, has led to renewed violence over the past week, with a demonstrator killed in riots targeting banks that have frozen savers out of US dollar deposits.
“Implementation is the hard bit, and Lebanon has consistently failed on this. Progress will only be possible with that, on the basis of greater political and public consensus,” a Western diplomat told Reuters.
With measures such as recovering stolen assets abroad, the plan could take years to return funds to depositors while some economists say it places too heavy a burden on a banking sector that has helped finance decades of large state budget deficits.
“This is basically a takeover of the banking sector by the state. I don’t understand how this will restore confidence,” said Nassib Ghobril, chief economist at Byblos Bank. “When you go this way, where is lending going to come from?” Ghobril asked.

Alexandra Najjar: The face of Beirut’s man-made tragedy 

Updated 1 min 8 sec ago

Alexandra Najjar: The face of Beirut’s man-made tragedy 

  • Death of three-year-old from injuries caused by August 4 explosions has brought grieving nation together
  • Outpouring of online tributes to Alexandra testified to the despair and anguish of Lebanese across the world

LONDON: In an ideal world, Alexandra Najjar should have been able to enjoy the rest of a pleasant Mediterranean summer with her family. Once the coronavirus outbreak in Lebanon had been tamed, she should have been able to experience her first day of school.

She would have made many new friends and begun to absorb all the knowledge that a three-year-old is capable of when they first enter kindergarten.

And as the days turned into weeks, which turned into months, which turned into years, Alexandra’s parents would have watched her grow into a young girl, enjoy life, dream big and perhaps achieve greatness in some field.

Alas, in the harsh real world of a crisis-wracked Lebanon, the dreams of Alexandra’s parents will remain just that.

Some 2,750 tons of ammonium nitrate haphazardly stored in a warehouse at the Port of Beirut exploded as Alexandra was playing with a friend on the evening of August 4, leaving her severely injured.

Photos and videos of Alexandra were shared widely on social media and tributes poured in online. (Reuters )

Shockwaves from that blast devastated Beirut, its streets blanketed in rubble and shards of glass with many of its residents caked in grey dust and crimson-red blood.

Three days later, after being in a critical condition in a hospital and suffering internal bleeding in her brain, Alexandra succumbed to her wounds.

“You killed us in our own home, in a place where I thought I could leave my family, protect my family . . . where if crimes are happening and we don’t have anything in this country, then at least we have our home where we can be safe,” said Paul Najjar, Alexandra’s grief-stricken father, in a TV interview on Saturday evening, assailing Lebanon’s leaders.

“What you did is a crime at the cost of our family that is so very united and this for me, at the most, is a crime at the cost of love because if there’s anything I should believe in, it’s this  — which was the foundation of our family, it still is and will continue to be so.”

As the pain of the Najjar family’s loss sank in, photos and videos of Alexandra — or “Alixou,” the name by which parents called her — began to be shared widely via social media platforms and WhatsApp groups, both in Lebanon and outside it.

Tributes poured in online, testifying to the despair and anguish Lebanese across the world felt in the aftermath of the explosions. Alexandra’s untimely death had put a human face on Beirut’s horrible tragedy.

In one of the pictures, Alexandra is seen sitting atop her father’s shoulders as he took part in a march during last year’s October 17 “revolution,” demanding an end to Lebanon’s twin bane of corruption and sectarianism.

The protesters were calling for a better world for all Lebanese — and a brighter future for Alexandra.

The captions accompanying the photos point to the impact of the Najjar family’s tragedy on the Lebanese people and diaspora.

Photos and videos of Alexandra were shared widely on social media and tributes poured in online. (Reuters)

“This is a photo of Alexandra protesting for a better Lebanon to remove the corrupt government and no one listened and now she’s in heaven,” former Miss USA Rima Fakih wrote below a post on Instagram.

Another caption says: “Alexandra, you are in each of our hearts and prayers today and always. Your death will not be in vain . . . we will make sure of it!”

Alexandra was one of the youngest victims of the Beirut explosions, whose human cost so far includes 150 deaths, nearly 6,000 injured and another 300,000 homeless.

After citizens and residents independently organized and cleaned up the streets and homes of the areas most affected by the blast’s impact, shock turned to anger.

“My message to the Lebanese is a message of unity,” Paul Najjar said in the interview. “They killed us — they didn’t kill Christians or Muslims or politically-affiliated or not politically-affiliated. There is none of this anymore — a message to all the people who are still following these people.

“Please, enough. We need to stand together. We need to stand united so that we can make the change, so we can revolt for the sake of Alexandra and every child and every family that wants to live in this country like we had hope for.”

Photos and videos of Alexandra were shared widely on social media and tributes poured in online. (Reuters)

Paul Najjar said he and his wife returned to Lebanon and set up a company in an effort to help the country.

“We had hope that we would help the country. We also hoped that Alixou would grow up in Lebanon,” he said.

On Saturday, thousands of Lebanese made their way to Beirut’s Martyrs’ Square demanding accountability for the explosions, and the resignation of all government officials. Many of them carried nooses, which they used for symbolic hangings of Lebanon’s principal political actors, including Hezbollah leader Hassan Nasrallah.

The government responded by deploying riot police and the army, who used rubber bullets and tear gas to subdue similar protests in front of the parliament in Riad Al-Solh Square and the nearby Beirut Souks.

Lebanese Red Cross and the Islamic Emergency and Relief Corps figures showed that the clashes left 728 more Lebanese injured, of whom 153 were taken to hospital and 575 treated on site.

“For your information, rubber bullets could kill and cause permanent damage. If necessary, it should be aimed at legs only. Yesterday, and in one hospital, there were seven open surgical eyes and a ruptured abdominal spleen,” Mohammad Jawad Khalifeh, a former Minister of Health, said on Twitter.

Meanwhile, little light has been shed by the government on why such a huge quantity of a highly combustible chemical was stored next to the Beirut Port Silos building after being confiscated from a Russian-leased ship six years ago.

“The incident might be a result of negligence or external intervention through a missile or a bomb,” President Michel Aoun said on Friday.

Whatever the truth, UNICEF has warned that almost 80,000 of those displaced by the “incident” are children whose families are in desperate need of support. 

One children’s hospital in the Karantina area, which had a specialized unit treating critical newborns, was destroyed.

Across Beirut, at least 12 primary health care facilities, maternal, immunization and newborn centers have been damaged, disrupting services for nearly 120,000 people.

Against this grim backdrop, Paul Najjar and his wife are hoping that Alexandra’s death will not be in vain but will have a positive impact when the nation rebuilds itself.


Twitter: @Tarek_AliAhmad