Willing to negotiate with the government to reschedule the public debt

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In a statement distributed this evening, Wednesday, under the title “The Association of Lebanon’s Banks in Lebanon’s Economic Recovery”, the society said that it presented during its meeting of the Parliamentary Finance and Budget Committee today its approach to getting Lebanon out of the crisis it faces, although the association was not informed or consulted in preparing a plan The government for economic recovery, knowing that the Lebanese banking sector is one of the most dynamic sectors in our national economy, and it contributes by 6% to the formation of our gross domestic product, as it contributes to a significant amount of public sector financing needs and government revenues, and uses approximately 26 thousand employees from Highly qualified and skilled.During the meeting, the association expressed its readiness to participate with the authorities in finding the most appropriate solution that should be adopted in the interest of the country.

The Assembly noted that the government plan for financial recovery contains several loopholes that would lead the country, if implemented, to a social and economic catastrophe. Although Lebanon is in an unprecedented crisis and suffering in the short term cannot be avoided, there is no reason to deepen the collective misery in the country and delay the economic recovery, adding that “there is no doubt that there are better ways to manage and exit the crisis and to enhance the strength of the financial system And the entire economist. “

Accounting exercises groupThe association said that the government’s plan is not an economic plan but rather a set of accounting exercises, and it has failed to address the roots of the crisis. Even if the balance is restored in the coming months, this will not last for only a short period, which opens the way for the reproduction of new imbalances that will be corrected again at the expense of the Lebanese.She noted that the government plan seeks to achieve this presumed balance through internal failure. And because defaults have major and serious complications, they are extremely rare. And if Lebanon drowns in severe economic downturn due to internal faltering, no light will appear at the end of the tunnel: Our capital is the human element that crosses borders.

She said that defaulting on internal payment would lower our production to a level lower than that in Yemen and Cambodia, and our people would suffer from poverty over the next decade. Moreover, the government’s plan also calls on the Banque du Liban to default. Unlike the Central Bank of Zimbabwe, central banks around the world always fulfill their obligations.

According to the association, the government’s plan notes even its initial repercussions. The severe economic recession coupled with internal faltering makes the government’s fiscal revenue numbers unrealistic. This is because the government plan did not realize that defaults in internal payments would lead to a sharper decrease in GDP than expected (25% instead of 14%).

Nor did it understand that tax revenue would deteriorate further, because tax compliance would be greatly reduced, and citizens would feel a lack of responsibility in financial matters, which would lead to the bankruptcy of many people and companies.

No economic vision

The association considered that the government does not provide an economic vision to get the economy out of recession. Indeed, we at the Assembly are firmly convinced that Lebanon can achieve significant economic growth of 5% to 6% annually through the adoption of an economic structure that enhances our competitive advantages, as was done by Hong Kong, Ireland, Singapore and others. These countries share much with us: they all have a small geographical area, they are all surrounded by large countries, suffer from scarcity of natural or primary resources, and they have qualified human capital.

Two pillars of the contribution of the Association of BanksThe Banking Association’s contribution to Lebanon’s financial recovery is based on a two-pillar approach, coupled with a clear timetable for phased implementation. The two pillars are:First, an immediate, balanced and effective response that addresses external financing needs and sets the financial and debt track in the medium term on a sustainable basis, while avoiding defaulting on domestic debt that will have devastating consequences for the Lebanese people and the country’s ability to restore confidence.

Second, launching long-awaited structural reforms in the coming months to promote sustainable and inclusive growth as a result of economic diversification.

Timely implementation of the interim

In its statement, the association said that it had prepared an economic approach based on the wealth of Lebanon – its residents – and the factors that led to the success of similar countries. This approach is based on diversifying the Lebanese economy from a rentier economy to a productive one, and making use of our huge human capital to successfully introduce Lebanon into the knowledge economy.

This diversification will be coupled with an ambitious and realistic infrastructure plan for transportation and communications, with structural reforms required for these sectors.

Contrary to the government plan, the association’s balance of payments projections stem directly from the aforementioned economic approach. It was estimated that the balance of payments would be based on its vision, by 2024.On the financial front, the association’s approach aims to achieve a realistic initial surplus of 2.1% of GDP in 2024, which places public debt in a positive context.

Fiscal performance will include the creation of a social safety net with an unprecedented value of 4% of GDP by 2024. We do not plan for this level of social spending in a thoughtful and unsatisfactory manner, but rather the level that we see as necessary to avoid the continuing decline of our citizens to poverty and destitution.

In the opinion of the association, these results can only be obtained if the government abandons its dangerous choice by adding the internal stumbling that is harmful to external stumbling. It is not possible to achieve financial stability or economic growth in a country that decides to cancel its debt unilaterally, confiscate property illegally, and interfere in private contracts.

There is no argument, in her opinion, that the rule of law and respect for the sanctity of contracts are prerequisites for economic growth. We will not succeed as a country if we adopt quick or hasty solutions to our problems, which is the opposite of what these prosperous countries did in times of crisis.Likewise, the association’s approach focuses on avoiding default on internal payments, and reduces external financing needs to about $ 8 billion instead of $ 28 billion during the same time horizon of the government’s plan.

The association’s approach stresses the main role that it plays, legally and regularly, of monetary and supervisory authorities in Lebanon in terms of restructuring the Lebanese financial sector and restructuring and rescheduling public debt. Therefore, we see, as a first step, that the government debt to the Bank of Lebanon must be settled fairly.

Adjustment Mechanism

Our approach envisages a settlement mechanism that includes the following steps:

Establishment of a government debt relief fund (GDDF);

– The government’s contribution through public assets or properties of $ 40 billion to the said fund in exchange for 100% of the fund’s shares, i.e. fully owned;

The issuance by the Fund of long-term secured securities of $ 40 billion, to be held by the Banque du Liban in exchange for the final settlement of government debt in favor of the central bank;

– The Bank of Lebanon assigns to the Fund the entire Eurobond portfolio and Lebanese treasury bonds; In return, the fund writes to the government the entire debt portfolio referred to above, against the assets that the government contributed to the fund.

– The fund’s balance of income is transferred to the public treasury after the fund pays the interest due to the Banque du Liban.

This internal exchange, which avoids default, can be implemented quickly and smoothly for the benefit of all stakeholders – allowing the government to move forward in dealing with the rest of the pressing issues and files, according to the association’s statement.

The association says, “Banks do not require rescue or floating because they do not need it. Our banking industry is sound, and what we need is for the government to adhere to what is necessary in time. The banks will be ready to immediately begin negotiating with the government to reschedule the public debt in the direction of extending The maturities of the benefits and the reduction of its interest in a manner consistent with the state’s ability to pay, while preserving the interests of depositors and the integrity of the banking sector within the legal and constitutional systems in force in Lebanon.

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