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The Lebanese government’s request to help the International Monetary Fund lift the country out of the critical crisis in which it is reeling with the collapse of the Lebanese pound, exploded high unemployment, debt default and protests, angering banks They criticized the move and believed it would undermine confidence in Lebanon, warning of “a state takeover of the banking sector.” Collapsing sources of loans.
Lebanon’s banks criticized on Friday Economic rescue plan It will be the basis of talks with the International Monetary Fund, describing it as “undermining confidence” in the country.
These criticisms, which may have a significant impact on the International Monetary Fund, given the fact that banks are among the largest holders of Lebanese debt, coincide with Beirut signing a request for assistance from the fund, an event that the Prime Minister Lebanese Hassan Diab described it as “a turning point in the history of Lebanon”.
The plan, which was approved by the Diab government on Thursday, paints tens of billions of dollars in losses to the financial system and harsh measures to pull the country out of a crisis that marked the collapse of the Lebanese pound, high unemployment , non-payment of debt and protests despite the quarantine imposed by the Corona virus.
Welcome and ask
On the other hand, some economists and diplomats welcomed the plan, as it constitutes the first important step towards recovery, while many observers questioned the possibility of implementing ambitious proposals to reduce public sector spending and reform the banking sector after years of slow implementation.
Lebanon brochure 10
In this context, former Economy Minister Nasser Saeedi said of the 53-page plan: “This means the beginning of serious negotiations with the International Monetary Fund, so this is very important news because it removes a lot of uncertainty. As I said earlier, the problem in Lebanon is always a matter of implementation. ” .
The Association of Banks in Lebanon said it could not “in any way” accept a plan that was not consulted, although it was “an essential part of any solution.” He called on parliamentarians to reject it, in part because it affects individual property. The plan does not need the approval of parliament.
“Undermining confidence in Lebanon”
“Local (bank) restructuring, as mentioned in the plan, will further undermine confidence in Lebanon locally and internationally. The plan may hinder investment in the economy and therefore prospects for recovery “The association said in a statement.
One of the main pillars of the plan depends on covering part of the losses of the financial sector in around $ 70 billion through the rescue of the bank’s shareholders that includes the deduction of capital and liquidity of the main depositors, which will be restored more ahead.
The association described the income and expense related procedures in the plan as vague and not supported by an accurate timeline for implementation, and said the plan does not address inflationary pressures and that in practice it can lead to very high inflation.
A source close to the banking sector said the International Monetary Fund will likely consult on the bailout plan before proceeding further. The source said the association intends to present its own plan to the government within a week or two.
The promises of the 2018 Paris conference
With the IMF program, Beirut expects foreign donors to release around $ 11 billion that they promised at a conference in Paris in 2018, which has been linked to long-stalled reforms.
The plan, which calls for an additional $ 10 billion in external support over a five-year period, also forms the backbone of talks with foreign bondholders that have yet to start, after Lebanon stumbled on paying $ 31 billion in international bonds in March.
“It is a big commercialization step for the government as there is a feeling that the government is starting to lose control. This plan shows that they are really looking to work for something,” said Nafez Sawouk, an emerging markets analyst at Oxford Economics. .
“The seizure of banks by the State”
The extremely rapid depreciation of the Lebanese pound, which has lost more than half its value since October, sparked a new wave of riots, as protesters were killed in riots against banks that exchange savings and deposits in US dollars.
“Implementation is the most difficult part, and Lebanon is constantly failing on this. Progress will only be possible with this and on the basis of greater political and popular consensus,” said a western diplomat.
Under measures such as recovering stolen assets abroad, this could take years, while some economists say the plan places a heavy burden on the banking sector that has helped for decades to finance a huge deficit in the public budget.
“This is essentially a state acquisition of the banking sector,” said Nassib Gabriel, chief economist at Byblos Bank. “I don’t understand how this trust will be restored … When you go this way, where will the loans come from?”
France 24 / Reuters
