This is how it was taken … and an “impossible mission” before the government

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Under the title “Financial Stumbling” leads to the announcement of non-payment of debts, “Al-Sharq Al-Awsat” wrote: “The presidential meeting that included Presidents Michel Aoun, Nabih Berri and Hassan Diab identified the broad title of the financial plan that the Lebanese government will adopt in managing public debt in hard currencies. The decision that was agreed upon as a result of the meeting to refrain from paying the overdue maturity tomorrow, Monday, with a value of $ 1200 million, with the opening of a “window” to negotiate later with local and external creditors. Coinciding with the Central Bank’s endeavor to restore the initiative in managing the exchange rate of the lira by setting a ceiling for the margin of cash transactions in the parallel market.

After the tripartite meeting, President Michel Aoun chaired a financial and economic meeting, with the participation of Parliament Speaker Nabih Berri, Prime Minister Hassan Diab, Deputy Prime Minister and Minister of National Defense Zina Akar, Minister of Finance Ghazi Wazni, Minister of Economy and Trade Raoul Naama, and Governor of the Bank of Lebanon Riyad Salama, the president of the Association of Banks Salim Sfeir, the general manager of the Presidency of the Republic, Antoine Choucair and a number of advisers. The meeting was devoted to discussing the question of the merit of “Eurobond” and the necessary measures to face the financial crisis.

After the financial meeting, General Manager of the Presidency of the Republic, Antoine Choucair stated, “Based on the options, the meeting decided to stand with the government on any option that it would adopt, except for the payment of the outstanding debts. The economic and social advancement as mentioned in the ministerial statement. “
The meeting constituted a protective reference umbrella for the financial decision and governmental trends in managing public debt that exceeds 92 billion dollars, including an international debt bond portfolio of approximately 30 billion dollars. “Standing alongside the government on any option that it will adopt, except for the payment of debts due. The focus was on adopting and implementing the comprehensive integrated plan based on financial, administrative and banking reforms that coincides with the economic and social recovery plan as mentioned in the ministerial statement.”
The character of the event applies to the financial decision, being the first of its kind in the history of Lebanon, which has never failed in its obligation to pay off its debt assets and interest in their due dates. This is what the experts classify as a turning point that can impose its rhythm later on on the overall economic and banking model that exists, especially in light of the rolling repercussions that have arisen and followed after the outbreaks of popular protests since last October 17, and led to a government change and take over the parliamentary majority composed, especially from an alliance Hezbollah, the Amal Movement, and the Free Patriotic Movement are the leaders of state affairs.
And while “Bloomberg” agency warned that Lebanon defaulted on the payment of the benefit, “it will lead to default on the other Eurobonds, which total about 30 billion dollars,” noting that it is not clear whether the government will be able to implement major reforms. Required by investors, such as raising taxes and freeing currency.
Markus Schnefix, a London-based economist and consultant for Middle East affairs, said that the Lebanese government was facing an “impossible mission.” It is an analysis consistent with the expansion of the credit risk swap margin for five years to unprecedented levels that exceeded the threshold of 25 thousand basis points compared to 2418 basis points at the end of 2019. In a clear indication of the deterioration of the financial markets view of the sovereign risks in Lebanon in general.
Experts agree with the position previously reported by the banks to the government economic team, that “failure to pay Lebanon’s external debt constitutes a significant event that needs to be approached with great accuracy and reckoning, and that what is in fact proposed is the reprogramming of the debt or its restructuring in understanding with creditors.” The matter is time, contacts and mechanisms that conform to international standards and similar approaches adopted by other countries, and calls for the use of the competent international bodies to build credible financial and monetary programs. “
The banking expert, Dr. Joe Sarrou, points out the accuracy and sensitivity of any financial decision within the prevailing deteriorating conditions. The “Eurobonds” vouchers due are part of a public debt financed by local banks and the central bank, and among them hold about two thirds of the foreign currency debt portfolio. Also, the bank’s investments with the central bank account for the largest part of customer deposits. Here lies the danger of the banks’ significant exposure to the country’s debt, while private sector investments are limited to about $ 50 billion, compared to total deposits of the resident and non-resident private sector of about $ 155 billion.
In an interview with “Al-Sharq Al-Awsat”, Sorouh warns that the change in the financial approach requires strict controls to prevent painful repercussions affecting the economic and banking model adopted in Lebanon since its independence. The banking sector was also exposed to unprecedented risks in its size and impact, including cross-border financial transactions and the network of relationships with correspondent banks. Note that the Lebanese economy is traditionally pegged to the dollar and about 77 percent of deposits are denominated in hard currencies.
“The current task should focus on re-correcting the position of Lebanon in its vicinity and in the middle of the international community. The financial gap that the country is suffering requires more than $ 25 billion in support from brothers and friends. Consequently, any rescue plans that require immediate start to accelerate the float of a conference,” he said. It will be administered “by committing to the comprehensive structural reforms program financially and administratively, and adopting the recommendations issued by international financial institutions, specifically regarding the issue of electricity and establishing a specialized department for managing public debt and boldness in addressing the public sector’s burdens on the budget and economy.”

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