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The scenario of the cessation of subsidies represents a terrible nightmare for the Lebanese. And to say that the support will stop after two or three months at the most makes some people go to hell. However, while it is recognized that the disaster has occurred, temporary measures are required to protect the country from risks that it cannot bear.
It is clear that those who read the words of Riad Salameh during the monthly meeting with the Lebanese Banking Association focused on the following sentence:
“The acute crisis is behind us.” Regardless of the interpretations that are given to this expression, which may have meant that the disaster occurred, and therefore it is necessary to focus on the next phase that is supposed to be dedicated to the gradual exit from the abyss, it is important to delve into the sensitive topics on which the central governor spoke, outside the context of this sentence. That caused confusion and controversy.
What Salameh raised in front of the representatives of the Lebanese banks is disturbing and can be discussed topic by topic, based on the following facts that the man related:
First, the frozen rescue plan.
Second: there is no plan for a negotiation approach with creditors after announcing the default in March 2020.
Third, negotiations with the IMF are pending.
Fourth – The State finances its deterioration of the deficit by printing the lira at the request of the Ministry of Finance, either to cover the budget deficit or to pay the installments of debt securities in lira.
Fifth, support for commodities can last no more than two or three months at most, and then it will stop altogether so as not to damage the mandatory reserve at the Banque du Liban.
Sixth – The need for banks to adhere to the regulations of circular 154.
Each of these points deserves a thorough discussion, and is much more important than the phrase “the crisis behind us”, because in reality it confirms that the crisis is in its beginnings, and what is expected, if the political path continues. as it stands, it will be much worse than the current suffering of the Lebanese.
Perhaps one of the hot spots is related to state funding through the printing of the lyre. The second point, which is no less dangerous, is related to the cessation of total support in two or three months at the most.
On the issue of currency printing, things look dramatic because the entire financial sector no longer owns hard currencies, while the stock of dollars hidden in households now exceeds the stock of all Lebanese banks in the country and with correspondent banks. Consequently, it is no longer possible to administer state affairs, pay salaries, secure necessary domestic spending, and partially liquidate dollar deposits in pounds, except by printing money. This means that the path of inflation (the fall in the price of the Syrian pound) is a permanent and upward path, which means that the catastrophe of hyperinflation is knocking at the doors. If this coercive route continues in conditions of political stagnation and the sterility of the resigned executive power, in word and deed, then the price of the dollar, which in its current state is a great crisis for the Lebanese, will move to another place where the term “hell” is applied with great precision.
This issue also opens the debate on the state budget for 2020, which has not yet seen the light, while the approval clause of this budget is contained in the document of conditions within the French initiative to form an “important government”. The budget, even if it is too late, would clarify the facts related to financing, especially since the Minister of Finance had previously denied what was raised earlier about the financing of salaries and expenses through the printing of currency, as we heard Salameh confirm it in front of the banks.
As for the cessation of subsidies, which people fear will lead to a disaster whose damages and repercussions are greater than the current catastrophe, it is necessary to dwell on the issue of the amount spent within the 8 months of support, which is estimated at about $ 10 billion, which is a catastrophic figure. Citizens were likely to actually benefit from the equivalent of two to three billion at most, while the rest was spent to fund smuggling, theft, fraud, waste and storage, which some parties are said to perform actively to ensure your ability to support your supporters later, when the disaster reaches its most difficult final stage.
This reality, in addition to the figure reached by the reserves in the Banque du Liban, means that the subsidy, in its current sense, must be stopped immediately, and a movement to rationalize this support. It is better to adopt the proposal that was presented above, through monthly financing cards. In a simple calculation, and if we consider that each family in Lebanon will receive 200 dollars per month, and according to the calculation that there are around a million families (based on 4 million people, with an average of 4 members per family) So this means $ 200 million a month. If we add the bill to support fuel for electricity, and we support the health sector in medicine to preserve the capacity of the guarantors, the total monthly bill becomes about $ 300 million. This means that the remaining 2.5 billion dollars (out of the mandatory reserves of about 17 billion dollars) are enough to support all Lebanese families and secure electricity and medicines for 8 months, enough time for them to rescue plans take off and start to pay off. This means that if we had taken this approach since filing for bankruptcy in March, we would have saved billions of dollars that were wasted in vain.
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