Lebanon plan based on flexible exchange rate in ‘coming period’- Finance Minister

Lebanon's Finance Minister Ghazi Wazni talks during a meeting with Lebanese political leaders to present the plan aimed at steering the country out of a financial crisis, at the presidential palace in Baabda, Lebanon May 6, 2020. (Reuters)
Short Url
Updated 06 May 2020

Lebanon plan based on flexible exchange rate in ‘coming period’- Finance Minister

  • "We are forced in the current phase to continue in the policy of fixing (the rate)," the minister said
  • The Lebanese pound has lost more than half of its value since October

BEIRUT: A government plan for getting Lebanon out of a financial crisis is based on a shift to a flexible exchange rate, but in the “coming period,” and a currency peg will be maintained for now, Finance Minister Ghazi Wazni said on Wednesday.
The government approved the plan, which entails vast losses in the financial system, last week, announcing it would form the basis of aid negotiations with the International Monetary Fund.
The crisis is seen as the greatest risk to Lebanon’s stability since its 1975-90 civil war.
Prime Minister Hassan Diab said the plan was not sacred and could evolve, urging Lebanese to set aside differences during a meeting with some of the country’s fractious politicians.
The Lebanese pound has lost more than half of its value since October and depositors have largely been shut out of their savings as dollars have become ever more scarce. Inflation, unemployment and poverty have soared.
The pound has been pegged at 1,507.5 to the dollar since 1997 and the central bank supplies dollars at this price for the purchase of fuel, medicine and wheat. Dollars were changing hands at over 4,000 pounds on the parallel market on Wednesday.
The plan is based on “a policy of a flexible exchange rate in the coming period, in a gradual and studied way,” Finance Minister Ghazi Wazni told the meeting.
He gave no time frame for the change but said freeing up the exchange rate before restoring confidence and securing international support would lead to a big deterioration in the value of the pound and uncontrolled price rises of basic goods.

DEBT DEFAULT
"We are forced in the current phase to continue in the policy of fixing (the rate)," he said.
The Diab government took office in January with backing from the powerful, Iran-backed Shiite group Hezbollah and allies including President Michel Aoun, the Christian Maronite head of state.
Speaking after the meeting, Samir Geagea, a Maronite rival to Aoun and Hezbollah opponent, said he would not support this or any other plan that did not start with serious steps to fight corruption and waste, including customs evasion.
These are widely seen as prime causes of the crisis, landing Lebanon with one of the world’s biggest public debt burdens. Lebanon defaulted on its sovereign debt in March.
Neither leading Sunni politician Saad Al-Hariri, a former prime minister and traditional ally of Gulf Arab and Western states, nor Druze leader Walid attended the meeting.
“Time is very precious. The accumulated losses are very big. The situation is very painful, and the chance to rectify (it) will not last long,” Diab said.
Wazni said Lebanon had started negotiations to restructure its sovereign debt two weeks ago. Benefits of going to the IMF included securing financial support of $9-$10 billion, he said.
Critics of the plan include Lebanon’s commercial banks. The plan foresees them sustaining losses of some $83.2 billion.
The banking association is working on its own plan that aims to preserve some of its capital rather than writing it off as set out in the government proposals.


US contractor told Lebanese port official of chemicals risk

Updated 54 min 16 sec ago

US contractor told Lebanese port official of chemicals risk

  • Concerns about the ammonium nitrate were known within the Lebanese government before the deadly blast
  • The thousands of tons of ammonium nitrate had been stored in the warehouse for more than six years

WASHINGTON: About four years before the Beirut port explosion that killed dozens of people and injured thousands, a US government contractor expressed concern to a Lebanese port official about unsafe storage there of the volatile chemicals that fueled last week’s devastating blast, American officials said Tuesday.
There is no indication the contractor communicated his concerns to anyone in the US government.
His assessment was noted briefly in a four-page State Department cable first reported by The New York Times.
The cable, labeled sensitive but unclassified, dealt largely with the Lebanese responses to the blast and the origins and disposition of the ammonium nitrate, which ignited to create an enormous explosion. But it also noted that after the Aug. 4 explosion, a person who had advised the Lebanese navy under a US Army contract from 2013 to 2016 told the State Department that he had “conducted a port facility inspection on security measures during which he reported to port officials on the unsafe storage of ammonium nitrate.”
Concerns about the ammonium nitrate were known within the Lebanese government before the deadly blast, officials said.
The contractor, who was not identified by name and is now a State Department employee based in Ukraine, was in Lebanon to provide instruction to members of the Lebanese navy. While there, he made a brief, impromptu inspection of physical security at the facility in 2015 or 2016 at the request of a port official, US officials said. The contractor was not identified.
The contractor, who has a background in port and maritime security, noted weaknesses in security camera coverage and other aspects of port management but was not assessing safety issues, according to the US officials, who spoke on condition of anonymity in advance of a planned public statement.
While inside the warehouse where ammonium nitrate was stored, the contractor saw problems such as poor ventilation and inadequate physical security, which he noted to the port official accompanying him, the officials said. It is unclear whether the port official reported this concern to his superiors.
The thousands of tons of ammonium nitrate had been stored in the warehouse for more than six years, apparently with the knowledge of top political and security officials. The catastrophic explosion one week ago Tuesday killed at least 171 peoples and plunged Lebanon into a deeper political crisis.
The contractor was working for the US Army’s Security Assistance Training Management Organization, headquartered at Fort Bragg, North Carolina. He provided instruction to members of the Lebanese armed forces in naval vessel traffic systems and small boat operations. His class was visiting the Beirut port as part of that instruction program when the port official asked him for the inspection, which US officials said lasted about 45 minutes.
The United States has a close security relationship with Lebanon. According to the State Department, the US government has provided Lebanon with more than $1.7 billion in security assistance since 2006. The assistance is designed to support the Lebanese armed forces’ ability to secure the country’s borders, counter internal threats, and defend national territory.
Last September a US Navy ship, the guided-missile destroyer USS Ramage, visited Beirut. It was the first time in 36 years an American warship had made a port visit there, according to the US military at the time.