Prominent Beirut university hit by coronavirus cash crisis

The American University of Beirut is currently in the midst of the worst crisis it has faced in its long history. (Shutterstock)
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Updated 09 May 2020

Prominent Beirut university hit by coronavirus cash crisis

  • AUB cuts staff amid perfect storm of Lebanese currency crash, COVID-19 pandemic and unpaid government debts

BEIRUT: One of the Arab world’s oldest universities faces its worst crisis since its foundation, with huge losses, staff cuts and an uphill battle to stay afloat as Lebanon’s economic meltdown and the coronavirus pandemic hit revenues.

The American University of Beirut (AUB) has graduated leading figures in medicine, law, science and art as well as political leaders and scholars over the decades.

It has weathered many crises, including Lebanon’s 1975-1990 civil war, when a number of staff, including two presidents, were killed or abducted, and a bomb destroyed one of its main halls.

But Lebanon’s problems now may be the biggest threat yet to the institution founded in 1866 by Protestant missionaries. It ranks among the world’s top 200 universities and its collapse would deprive future generations in Lebanon and the wider region of internationally recognized higher education.

“This is one of the biggest challenges in AUB’s history. The country is crashing catastrophically,” AUB President Fadlo Khuri told Reuters in an interview.

With inflation, unemployment and poverty high, many families have little means to cover food and rent, let alone tens of thousands of dollars in tuition fees.

The heavily indebted state, which defaulted on its foreign currency debt in March, owes AUB’s medical center — which attracts patients from across the Middle East and Central Asia — more than $150 million in arrears.

Government officials have ruled out a haircut on the bank deposits of non-profit universities such as AUB, but Khuri still fears his institution may take a hit if a state rescue plan puts part of the burden on large depositors and includes colleges.

Along with other universities, his school has lobbied the state and, he said, received assurances from the president and finance minister that any such measures would not impact them.

But he remains worried, with plans for plugging vast holes in the national finances not yet finalized. “We have all this money they (the state) still owe us for the hospital so it’s very hard to rely on well-intentioned people who may or may not have the ability (to deliver),” he said. Government officials could not be reached for comment. 

The university and hospital expect real losses of $30 million this year after bleeding revenues. For 2020-2021 alone, it projects a 60 percent revenue reduction from this year, down to $249 million.

The stark revenue forecasts rely on an “optimistic assumption” that the Lebanese pound will stabilize at 3,000 to the dollar, but Khuri has said they do not take into account a possible haircut imposed on AUB’s bank deposits in Lebanon.

Finance Minister Ghazi Wazni has said there will be a shift to a flexible exchange rate in the “coming period.”

Khuri said AUB would have to set its own rate in the meantime, taking into account people who say they can pay in dollars to help cushion the impact of the pound’s collapse on poorer students.

AUB has already lost donations and scholarships it was expecting before the pandemic. On top of benefit and wage cuts, it is studying options such as closing whole departments and halting spending.

In an email to students and families, Khuri promised to work to protect their livelihoods and to raise money via an emergency fund.

“But there is no question that sacrifices must and will take place at every level,” Khuri wrote. “We must fundamentally change in order to survive ... Saving AUB must be our only priority. And save it we will.” 


Saudi Arabia looks to cut spending in bid to shrink deficit

Updated 01 October 2020

Saudi Arabia looks to cut spending in bid to shrink deficit

  • Saudi Arabia has issued about SR84 billion in sukuk in the year to date

LONDON: Saudi Arabia plans to reduce spending next year by about 7.5 percent to SR990 billion ($263.9 billion) as it seeks to reduce its deficit. This compares to spending of SR1.07 trillion this year, it said in a preliminary budget statement.

The Kingdom anticipates a budget deficit of about 12 percent this year falling to 5.1 percent next year.

Saudi Arabia released data on Wednesday showing that the economy contracted by about 7 percent in the second quarter as regional economies faced the twin blow of the coronavirus pandemic and continued oil price weakness.

The unemployment rate among Saudis increased to 15.4 percent in the second quarter compared with 11.8 percent in the first quarter of the year.

The challenging headwinds facing regional economies is expected to spur activity across debt markets as countries sell bonds to help fund spending.

Saudi Arabia has already issued about SR84 billion in sukuk in the year to date.

“Over the past three years, the government has developed (from scratch) a well-functioning and increasingly deeper domestic sukuk market that has allowed it to tap into growing domestic and international demand for Shariah-compliant fixed income assets,” Moody’s said in a statement on Wednesday. 

“This, in turn, has helped diversify its funding sources compared with what was available during the oil price shock of 2015-16 and ease liquidity pressures amid a more than doubling of government financing needs this year,” the ratings agency added.