Stability needed to put Lebanon on path to recovery

Lawmakers have so far passed a banking secrecy law that failed to implement the IMF's requirements of lifting banking secrecy as a whole.

BEIRUT – Lebanon’s economic experts urged the election of a president and the formation of an efficient cabinet capable of forcing the implementation of structural reforms to reach a deal with the International Monetary Fund (IMF) and put the country on the path to recovery.

“It’s all a matter of governance… we need powerful authorities capable of standing up to parties that are obstructing reforms,” Nasser Saidi, former economy minister and owner of Nasser Saidi & Associates, an economic advisory and business consultancy firm, told Xinhua.

Saidi said that the real problem in Lebanon stems from the lack of appetite for implementing necessary reforms over the past three years.

The IMF reached in April a staff-level agreement to provide Lebanon with 3 billion U.S. dollars on condition that the country implements reforms, including restructuring the financial sector, passing a budget for the year 2022, restructuring the external public debt, reforming state-owned enterprises – particularly in the energy sector – and strengthening anti-corruption frameworks.

Lawmakers have so far passed a banking secrecy law that failed to implement the IMF’s requirements of lifting banking secrecy as a whole. Authorities also approved a 2022 budget that falls short of economic reform measures that would pave the way for an IMF deal.

“In my belief, authorities may not want to bear the backlash from reforms,” Saidi said.

For Saidi, among the most important measures that the government should adopt in addition to the restructuring of the banking sector, is moving the public sector’s assets, including the Electricite Du Liban, water, telecom, casino, and Middle East Airlines, to a national wealth fund managed independently to ensure transparent management and governance.

Mohamad Fheili, owner and managing director at M.I. Fheili & Associates, a business advisory services company, said Lebanon needs a productive political system willing to adopt brave measures to allow economic recovery in the crisis-hit country.

Fheili emphasized the importance of negotiating with creditors to restructure Lebanon’s external debt, which would help partly restore confidence in the country and allow it to return to the international financial markets.

He noted that the IMF might dispense money for Lebanon regardless of the imminent election of a new president on condition that authorities show sincere and genuine intention to implement necessary changes.

The Lebanese parliament convened five times over the past two months but failed to agree on a new president as former President Michel Aoun’s term ended on Oct. 31.

Donor countries and institutions warned that a vacant presidential seat would negatively impact the country’s ability to make reforms and obtain rescue from its economic woes.

Saidi told Xinhua that Lebanon’s failure to obtain rescue will lead to further deterioration.

“We will continue with a cash economy without a role for the banking sector, so it will be difficult to get the needed capital and funding for rebuilding infrastructure. It will also be difficult for the private sector to survive and recover, not to forget that Lebanon won’t be able to attract foreign investments,” he said.

For his part, Fheili said in the absence of reforms, the components of the public sector will face more economic exclusion. In contrast, the private sector will be forced to undergo more drastic restructuring and further downsizing to continue serving the economy.

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