Deputy Prime Minister al-Shami discusses IMF agreement

Press Highlights
2023-03-28 | 03:55
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Deputy Prime Minister al-Shami discusses IMF agreement
Deputy Prime Minister al-Shami discusses IMF agreement

After the completion of the International Monetary Fund's consultations with Lebanese officials under Article IV of the Fund's Articles of Agreement, which assesses the economic, financial, and monetary situation and provides advice on policies that help overcome the difficult situation, and with the issuance of the Fund's final statement warning of the danger of the situation in Lebanon and the possibility of sliding into a crisis with no foreseeable horizon, calling on the Lebanese authorities to take immediate and decisive action to implement the reform package they committed to, within the framework of the agreement on the staff level, some politicians competed to praise the Fund's statement as if they were unaware of the seriousness of the situation that the government has been warning about.

Deputy Prime Minister Saadeh al-Shami said he repeated many times that if the procrastination and wasting of precious time continued, "we are heading towards more tragic conditions and ominous circumstances." 
Deputy Prime Minister Saadeh al-Shami wrote the below:
I also emphasized that any delay in the required reforms will increase the difficulty of finding solutions and exacerbate the situation, which I have expressed in articles, TV interviews, and several statements, as well as in the Parliament. 
But perhaps the calm voice from within did not find attentive ears, so I raise my voice loudly, hoping that officials would expedite the approval of reforms wherever they were located.

A year has passed, and nothing noteworthy has happened

We are approaching the first anniversary of our agreement with the Fund on a comprehensive financial and economic reform plan. Still, only a small part of the required measures to finalize the agreement has been implemented. 

The political class either lives in a state of denial, perhaps due to some of them not being familiar with the complex economic issues facing Lebanon, or they are fully aware of the seriousness of the situation, but the conflicting interests prevent some of them from moving forward with the reforms under false pretenses.

Here are some examples and indicators: The law amending bank secrecy was approved incompletely despite repeated attempts to draw attention to this matter in Parliament, but results have yet to be received. As for the "Capitol Control" law, three years passing since its discussion began and twelve joint committee meetings, the revised version differs significantly from the government's proposed law and is unacceptable to the Fund."
As for the unification of the exchange rate and the audit of foreign assets at the Central Bank, both of which are preconditions for reaching an agreement with the Fund, they are still pending. It is known that the audit of foreign assets conducted by the international audit firm KPMG has been completed for some time, so it is not understandable why this report has yet to be published.
In addition, despite the significant distortions resulting from multiple exchange rates, which have led to speculative activities benefiting some at the expense of the majority of Lebanese, especially depositors, a decision has yet to be made to unify the exchange rate to stop these distortions.
Further deterioration in the exchange rate
Despite all this, many wonder why the exchange rate is deteriorating at such a rapid pace. This was the subject of discussion in joint committees in the Parliament last week. 
The exchange rate is a reflection of the difficult economic, financial, and monetary situations, as well as the political crises resulting from the irregular work of constitutional institutions, including the vacancy of the presidency and the presence of a caretaker government that meets only to manage the public facilities and address urgent living matters. In addition to what is happening with the primary entity responsible for exchange rate stability and the near-total paralysis in the public sector.
Funding the deficit in the general budget, resulting from an increase in expenses that are not matched by the rise in revenues, has led to excessive currency printing and a persistent increase in the size of the monetary block, which has resulted in pressure on the exchange rate and a skyrocketing rise in prices.
From time to time, the central bank intervenes to curb the rise in the exchange rate by withdrawing quantities of Lebanese pounds from the market, resulting in additional losses in foreign reserves and further depletion of depositors' funds. Then, the central bank buys dollars from the parallel market to avoid a decrease in foreign reserves, and this cycle repeats periodically.

All of these are temporary and fragmented solutions that come as a reactive measures outside of a coordinated plan and package of reform measures, leading to a continuous cycle of an empty loop. 
In this context, the proposed increases in salaries for the public sector and their high costs will increase these pressures if the necessary foreign financing is not available, and will contribute to the collapse of the exchange rate. Continuing this approach will lead to excessive inflation, reminiscent of what happened in Germany after World War I and what Venezuela is currently experiencing.

Where are the statesmen?

Lebanon needs statesmen who are not driven by populism, who lead public opinion rather than being led by it, who speak the harsh truth to citizens, and who take bold stances for the benefit of everyone. 
The country is collapsing and disintegrating before our eyes while we debate the gender of angels. The building is crumbling and some are waiting for it to collapse completely, thinking that they can rebuild it from scratch and resize it without caring that accommodating everyone may not be possible. Therefore, I call on everyone to cooperate and save Lebanon from a bleak fate so that we can secure a dignified life for citizens after the pain and suffering have reached levels that threaten a social explosion.

Difficulty and cost will increase
Some politicians and analysts believe that due to the slow progress in implementing the preconditions, the International Monetary Fund (IMF) will withdraw from the agreement and from Lebanon. 

However, I have repeatedly emphasized that the IMF will not withdraw from Lebanon. The mission of the Fund has confirmed that the agreement on the staff level is in place with its basic details, even if there is a need to update the numbers and dates that were based on specific assumptions over time. 

But if we delay in implementing the required reforms and if we do not do what we should, this practically means that we are the ones who want to withdraw from the agreement that was agreed upon by the three presidents and approved by the Council of Ministers. 

The decision is ours, and the future of Lebanon is in our hands. The International Monetary Fund and the international community are assistance elements, but they do not decide our fate."

If reform is delayed, it damages Lebanon's reputation and the willingness of donor countries to secure the necessary funding. 

This increases the difficulty and cost of the measures, which in turn may make the IMF more stringent. This is what we noticed during our discussions with the IMF mission regarding new issues and proposals consistent with the agreement's fundamentals. 

But suppose we fulfill our commitments to the international community and do so promptly. In that case, we can lay the groundwork for the necessary credibility, which will provide some flexibility from the IMF and facilitate a review of some aspects of the agreement if we discover certain gaps in the program during its implementation.

Stirring up against the plan

Media incitement against the recovery plan developed by the government, which was agreed upon with the IMF on April 7 of last year, as well as against the detailed and expanded plan sent by the Prime Minister to Parliament on September 9 of last year, complicates matters.

Mobilization against the plan 
The media campaign against the recovery plan developed by the government, which was agreed upon with the International Monetary Fund on April 7 of last year, and against the detailed and expanded plan sent by the Prime Minister to Parliament on September 9 of last year, complicates matters. 
It is surprising that some politicians of different political factions, as well as some media outlets, still claim loudly that the government has no plan. 

It is evident from the discussions in Parliament that some MPs have not been informed about the plan's details or are ignoring its existence for other purposes. Some of them, while preaching on media outlets the necessity of reaching an agreement with the International Monetary Fund and adhering to its program, are ignoring or criticizing at the same time the government's plan, which is the cornerstone and reference of the agreement with the Fund.

Some may not be aware of this, or perhaps they are aware but do not dare to openly support the government's program to avoid being accused of being with the "system." They forget or overlook that some people have no relation to the system but are working to save the country from the economic disaster resulting from the poor economic policies that have been followed over the years.

I have completed my mission... but

In this regard, I want to point out that my primary task in the government was to prepare a comprehensive economic program and reach an agreement with the International Monetary Fund to put Lebanon on the path to recovery. 

This task has been accomplished, but the implementation is still elsewhere. I have tried and advocated for this plan because the proposed solutions are possible if there is political will and the right intentions to implement them. 

But if the officials do not take action quickly, I fear that the door to salvation will be closed to us, and we will lose hope. I see the light at the end of this long tunnel fading gradually and almost completely extinguishing. At that point, it may be necessary to exit this tunnel. With a resigned government, the official may have to retreat into the shadows not to be a false witness to what is happening, which ultimately leads to an irreparable collapse.

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