Lebanon is grappling with the worst economic crisis in its recent history, tens of thousands of Lebanese have lost their jobs or part of their salaries, and their purchasing power has eroded, while the dollar reserves are depleted to import vital subsidized materials such as wheat, medicine and fuel. In March, for the first time in its history, Lebanon defaulted on Eurobonds, which have a total value of more than $ 30 billion. Then he asked for help from the IMF.
“The IMF left the session (online), and the negotiations stopped,” said a Lebanese negotiator, who declined to be named, told AFP.
Another source familiar with the negotiation process explained, “The representatives of the Fund did not see the seriousness of the Lebanese delegation, no one wants reform. Each (Lebanese) party struggled for its own benefit while letting the country burn.”
Since May, 16 sessions have been held. The difference between the government estimates of the total losses of the state and financial banks, and the estimates of the central bank and the Association of Banks was evident. Most of the country’s debt is returned to the banks.
The government estimated these losses at 241 thousand billion pounds, and Parliament entered through a fact-finding committee that said the losses ranged between 60 and 91 thousand billion pounds. But the IMF considers government figures closer to reality.
The informed source says that Parliament acts as if it is “a representative of the interests of political forces, not the people.”
The Lebanese negotiator believes that “the lobby, which is ready to burn the country so as not to reveal its actions, is very strong and influential.”
For decades, Lebanon has witnessed successive crises and deep sectarian and political divisions that have prevented the establishment of an effective state. The logic of the settlements and the sharing of quotas over reform have been overwhelmed, and politicians are accused of taking bribes and kickbacks on all public projects.
In October, hundreds of thousands of Lebanese rose up against the political class, accusing it of corruption and impotence. Momentum of movements decreased with the outbreak of the new Corona virus.
“Begging is over”
Almost half of the Lebanese people live below the poverty line, and the unemployment rate has reached 35 percent. And many are unable to even fill their refrigerators. Four Lebanese committed suicide in the past two days, due to their difficult circumstances. Mothers on social networking sites swap their clothes or holdings of their homes for milk and diapers, in a scene that Lebanon is not used to in the harshest of circumstances.
Last month, Treasury Adviser Henry Shaul and its Director General Alan Biffany, two members of the negotiating delegation, resigned because of “the absence of a real will to reform,” they said.
The Ministry of Finance insists that negotiations with the IMF continue, and that what the fund has requested is to standardize the numbers and expedite the implementation of reforms.
Among the reforms required are reducing public expenditures, improving tax revenues, controlling borders and reforming public utilities, notably the electricity sector, which has cost the state treasury more than $ 40 billion since the end of the civil war (1975-1990). The fund is to discuss reforming the electricity sector with the Lebanese side in a technical session this week.
Although successive governments pledged since the end of the civil war (1975-1990) to reform, this remained ink on paper.
“There is no political intention for reform,” said Nasser Yassin, director of the Issam Fares Institute for Public Policy and International Affairs. “The leaders prefer that serious reforms not be undertaken under the pressure of the IMF or donor countries or the pressure of the street, in exchange for the country’s situation remaining reeling without collapsing to ensure that they do not lose everything,” he says.
Achieving the reforms, according to Yassin, means “stripping them of many of their tools of work, power and possession of the state, the economy and society through their networks and by feeding patronage and patronage.”
The source familiar with the negotiations says that the political class must understand that “the time for begging is over and no longer make any false promises of reform.”
A Western source familiar with the content of the talks, who refused to reveal his identity, says that the last negotiation session “went very badly” and ended with the request of the International Monetary Fund from the Lebanese delegation “to stop tricking us.”
He recounts that Finance Minister Ghazi Wazni tried to contain the tension by asking to move to discuss another point, and the answer came to him, “There is no next point.” No date has been set yet for the next negotiation meeting.
The fund calls on the government to take immediate measures, including liberalization of the exchange rate, criminal scrutiny of the accounts of the Bank of Lebanon, and formal registration of capital, according to the sources.
Since the negotiations started, the exchange rate has risen from four thousand to nine thousand against the dollar on the black market, while banks impose tight restrictions on deposits and prevent customers from withdrawing their dollars.
“State of denial”
But what if Lebanon does not get the IMF support?
“I don’t see what could be a substitute for help from the fund … the country is collapsing, and the lira as well, while officials are in denial,” the Western source replies.
Lebanon aspires to obtain more than 20 billion dollars in external support, including 11 billion approved by the Cedar Conference held in Paris in 2018, on condition of reforms.
The western source asserts that no one of the donors will invest in Lebanon in light of an unstable currency and without a program with the IMF. “Signing the IMF will restore the reputation,” he says.
In a remarkable situation, French Foreign Minister Jean-Yves Le Drian warned on Wednesday of the “danger of collapse” in Lebanon. “The Lebanese authorities should regain control and allow myself to tell our Lebanese friends: We are really ready to help you, but help us to help you,” he said.
“We are supportive of Lebanon as long as it is carrying out reforms properly and is not an agent of Iran,” US Secretary of State Mike Pompeo said on Wednesday, bearing the support of Hezbollah, which is currently the strongest political party in Lebanon.
“With a fugitive dollar, with no ceiling, which prevents it from reaching the threshold of 25 or 50 thousand pounds and daily inflation, Lebanon, without the International Monetary Fund, will go to hell,” the informed Lebanese source said with passion.