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Muhammad Wahba wrote in “Al-Akhbar”:Intentional recession “is not just a title for the newspaper” Lebanese Economic Monitor “published yesterday by the World Bank, but rather a summary of a detailed account of the indicators of the crisis and the potential risks. The bank did not provide figures and indicators unknown about the deterioration of the exchange rate and its multiplicity of markets, the contraction of the economy and negative growth … But it determined who intentionally traced the path to this abyss: it was discretionary monetary policies that led to the deduction of deposits They hit workers and their savings, as well as small businesses, and created inflation that hit the poor and marginalized, rather than devising domestic bailout solutions that start with bank shareholders and impose a wealth tax. The international community does not rule out that these policies could lead to an inflationary spiral, or the so-called “hyperinflation”.»
The World Bank says in the newsletter “Lebanese Economic Monitor” that the “current adjustment” in the financial sector is considered to be largely downward because it focuses on the smallest depositors, the local workforce and the smallest institutions. What is understood by “current adjustment” is the correction resulting from the crisis and the policies adopted to deal with it. These policies were monetary (the Banque du Liban is unique in designing and implementing these policies) and led to the following result: “The transfer of deposits in US dollars to Lebanese pounds and deductions of deposits in dollars is a reality despite the official commitment by commercial banks and the Bank of Lebanon to protect deposits. ” As for the burdens resulting from these procedures, they fell on “small depositors who have no other source of savings”, and these burdens also fell on the shoulders of “the local workforce whose wages are in Lebanese pounds”, as well as on the shoulders of “smaller institutions”.».
Thus was published the periodic newsletter of the World Bank, entitled “Arbitrary Recession.” It is the recession caused by the monetary policies of the Banque du Liban that have been implemented during the last twelve months. The World Bank not only blamed the Banque du Liban, but also dedicated an entire annex to the periodic bulletin to list and define the BDL’s procedures since last October. It turned out that there are 22 circulars, of which 10 were classified by the World Bank under the heading of monetary policies and exchange rate, two in the framework of banking regulation and the rest in the context of economic and social support (especially after the port explosion)..
How did this happen? The story that the World Bank presents in its periodic bulletin is the same one that has been repeated repeatedly in recent months, especially about the deliberate failure of the exchange rate and the multiplicity of its markets, and the issuance of money to melt deposits and inflate inflation … But the World Bank re-presents this narrative in a specialized, technical and supportive framework Evidence and evidence.
The World Bank narrative begins with the government’s approval of a financial recovery plan. This plan met with widespread opposition from the Banque du Liban and the banking sector, and several of the key members of the team that created it resigned after a dispute over determining the size of the losses. This dispute is considered vital for debt restructuring, given the large amount of public debt transferred by the Central Bank and the banks. The latter, says the World Bank, defends mechanisms to acquire public assets such as “gold reserves and state-owned real estate, in order to cover losses on their balance sheets.” This is a rescue from the outside (rescue)This is inconsistent with the restructuring principles that protect taxpayers. These principles include internal rescue solutions. (to rescue in) Based on the hierarchy of creditors, starting with the bank shareholders. The government can also impose a wealth tax (on financial and real assets) as a tool to progressively restructure the financial sector.».
In other words, the World Bank believes that Lebanon is mired in a long-term and arduous recession, given the lack of the necessary policies. “The pressures facing the exchange rate will continue to stifle trade and financing in a highly globalized economy, prevent the flow of capital and goods and affect entire supply chains.” He points out that in the absence of a capital controls law (“Capital Control”), the gap between banks and between them and their clients on the one hand, and the clients of the same bank as well, will increase and fuel violent reactions. “The main reason for applying irregular restrictions to the movement of withdrawals and transfers is due to the lack of transparency and compliance … Several clients have been able to transfer their money abroad despite these restrictions.».
So what is the scenario that awaits Lebanon in light of this reality?
The answer that the World Bank gives without adopting it in its entirety is in the form of a scenario that summarizes the current debate related to the subsidy of commodities, the destination of the exchange rate and the use of reserve deposits in dollars … The problem does not It is currently in that useless debate of lowering the ceiling of foreign currency reserves and being deposits, but it is in the purpose of using these funds. This matter, which several Lebanese economists have repeatedly mentioned, about the need to know the amount of funds available for use to determine their fate in the management of a comprehensive and fair treatment plan, has today become the demand from the World Bank. The bank believes that the constant melting of foreign exchange reserves in the Banque du Liban risks entering a spiral of stagflation. What is this vortex? “When the Banque du Liban stops subsidizing the import of vital commodities, especially fuels, medicines and basic foodstuffs, importers will seek dollars in the parallel market, which will exacerbate inflationary pressures on flow and stock levels. Commodity prices will rise, which is directly reflected in increased demand for the dollar on the parallel market (the black market), and this in turn is reflected in the exchange rate, which also fuels inflation. Thus, the stock of cash in circulation will increase and put more pressure on the exchange rate. Wealth will also be transferred from depositors to creditors … ». The most accurate expression of this spiral is hyperinflation..
Whether it’s high inflation, like what’s happening now after inflation hit 120% last August, or hyperinflation that will happen later, the cause is one: the monetary policies of the Central Bank of Lebanon. “Monetary policies reflect the financial and economic crisis centered on exchange rate pressures that triggered triple-digit inflation,” says the World Bank, but adds a definition of inflation as follows: Inflation is a regressive tax ( opposed to progressive) affecting the poor, the marginalized and those with fixed incomes such as Retired.
As a result, the World Bank expects the poverty level to rise so that the number of poor people will exceed half the country’s population by 2021. Poverty will affect all population groups through various channels, such as loss of life. productive employment, the decline in real purchasing power and the suspension of international transfers..
