Without IMF bailout, what does the future hold for Lebanon?

Lebanese anti-government protesters outside a police barracks in Beirut demanding sweeping economic reforms. (AFP)
Short Url
Updated 11 July 2020

Without IMF bailout, what does the future hold for Lebanon?

  • The government estimated losses at around 241 trillion Lebanese pounds, which amounts to about $69 billion at an exchange rate of 3,500 pounds to the greenback

BEIRUT: Talks between crisis-hit Lebanon and the International Monetary Fund are deadlocked, and leaders reluctant to enact reforms. Without a vital multibillion-dollar bailout, is Lebanon headed for “hell“?

For months, the Mediterranean country has grappled with its worst economic crisis since the 1975-1990 civil war.
Tens of thousands have lost their jobs or part of their salaries, while a crippling dollar shortage has sparked rapid inflation.
After the country for the first time defaulted on its sovereign debt in March, the government pledged reforms and in May started talks with the IMF toward unlocking billions of dollars in aid.
But 16 meetings later, the negotiations are stalling.
“The IMF has left the negotiating table and talks have stopped,” said a member of the Lebanese negotiating team speaking on condition of anonymity.
Another Lebanese source familiar with the negotiations said IMF representatives have “not sensed serious commitment from the Lebanese delegation” toward reform. “Every faction is vying for its own personal interests while the country burns,” they said.
Deadlock is common in multi-confessional Lebanon, where politicians have for decades been accused of cronyism, conflict of interest and corruption.
As Lebanon seeks help from the IMF, arguments are mounting over the scale of total financial losses for the state, central bank and commercial banks.
The government estimated losses at around 241 trillion Lebanese pounds, which amounts to about $69 billion at an exchange rate of 3,500 pounds to the greenback. But a parliamentary committee quoted much lower figures using the old currency peg of 1,507 pounds to the dollar.
The IMF considers the government’s figures to be more likely.
The discrepancy in the figures shows the great power and influence of a “lobby ready to see Lebanon burn rather than expose what they did to it,” the Lebanese negotiator said.
Since October, the deepening turmoil has sparked mass protests demanding the wholesale removal of a political class seen as incompetent and corrupt.
The crisis has shot poverty up to almost 50 percent, and unemployment to 35 percent.

FASTFACT

Lebanon’s government says it needs $20 billion in external funding, an estimate that includes an $11 billion aid package pledged by donors at a Paris conference in 2018.

In recent days, the Lebanese pound fetched more than 9,000 to the greenback on the black market.
With prices soaring, many can longer afford to fill their fridges, while others have started bartering clothes or household items online for baby milk and diapers. Four Lebanese killed themselves last week in suicides apparently linked to the economic downturn.
In March, the government pledged reforms long demanded by international donors, including budget cuts, tax hikes and electricity sector reform, but little has come through.
A Western source said that the last meeting “went very badly,” ending with IMF negotiators urging Lebanon’s representatives “to stop taking them for a ride.”
Two key members of Lebanon’s negotiating team who resigned last month have accused the government of showing no clear commitment to reform.
On Wednesday, French Foreign Minister Jean-Yves Le Drian said that he was “very worried.” “Help us help you, dammit,” he urged.
Analyst Nasser Yassin said the ruling class lacked political will.
“To guarantee they won’t lose everything, they would rather the country remain on the cusp of collapsing than initiate serious reforms,” he said. Such reforms, he said, “would strip them of essential tools they use to impose authority and control over the state, the economy, and society.”
Among the IMF’s demands are that Lebanon audit its central bank, and issue official capital controls to replace informal withdrawal and transfer caps imposed by the banks since the autumn.
It has also requested the country float its currency so Lebanese can follow a single exchange rate. To further complicate matters, the IMF talks come as tensions rise between the US and Hezbollah, the Iran-backed Shiite movement that is a key political player in Lebanon.
“Hezbollah is a terrorist organization and we are supportive of Lebanon as long as they get the reforms right and they are not a proxy state for Iran,” US Secretary of State Mike Pompeo has said.
The Western source said: “I don’t see any alternative to assistance from the IMF.” “The country is collapsing, and so is the Lebanese pound, while officials are in denial.”
Lebanon’s government says it needs $20 billion in external funding, an estimate that includes an $11 billion aid package pledged by donors in 2018. But without an IMF rescue, donors are unlikely to pump money into Lebanon, the Western source said.


India to invest $1.46 trillion to lift virus-hit economy

Updated 15 August 2020

India to invest $1.46 trillion to lift virus-hit economy

  • Modi announced a national digital heath plan under which every Indian will get an identity card containing all health-related information
  • Modi said the government has identified 7,000 infrastructure projects to offset the economic impact of the pandemic
NEW DELHI: India’s prime minister said Saturday his country has done well in containing the coronavirus pandemic and announced $1.46 trillion infrastructure projects to boost the sagging economy.
The key lesson India learnt from the pandemic is to become self-reliant in manufacturing and developing itself as a key supply chain destination for international companies, Prime Minister Narendra Modi said.
“The coronavirus epidemic is a big crisis, but it can’t stall India’s economic progress,’’ Modi said in a speech from New Delhi’s 17th century Mughal-era Red Fort to mark 74 years of the country’s independence from British rule. He wore an orange and white turban with a long scarf around his neck.
He also said that three vaccines are in different phases of testing in India and it will start mass production as soon as it got a green light from scientists. “Detailed plans are in place for large-scale production of corona vaccine and making it available to every Indian,” he said.
India’s coronavirus death toll overtook Britain’s this week to become the fourth-highest in the world as the country reported over 2.5 million confirmed cases, just behind the US and Brazil.
Modi also announced a national digital heath plan under which every Indian will get an identity card containing all health-related information.
The celebrations were curtailed on Saturday because of the pandemic, with invitations going only to 4,000 guests instead of normal 20,000, media reports said.
The International Monetary Fund projected a contraction of 4.5 percent for the Indian economy in 2020, a “historic low,” but said the country is expected to bounce back in 2021.
Modi said the government has identified 7,000 infrastructure projects to offset the economic impact of the pandemic.
“Infrastructure will not be created in silos anymore. All infrastructure has to be comprehensive, integrated and linked to each other. Multi-modal connectivity infrastructure is the way forward,” he said.
He said that India saw a record 18 percent jump in foreign direct investment in the past year, a signal that the international companies are looking at the country.
Modi didn’t refer to China directly, but India is trying to capitalize on its rival’s rising production costs and deteriorating ties with the United States and European nations to become a replacement home for large multinationals.
Referring to border tensions with China in the Ladakh area, he said Indian forces had given a befitting response in the mountainous region where thousands of soldiers from the two countries remain in a tense standoff since May. India said 20 of its troops died in hand combat with Chinese troops on June 15.
“Whether it’s terrorism or expansionism, India is fighting the challenges bravely,” Modi said in apparent references to threats from neighboring Pakistan and China.