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Lebanese Finance Minister Ghazi Wazni announced that his country is ready to comply with the request of the International Monetary Fund to float the lira exchange rate, but after receiving external support, provided that a flexible exchange rate is adopted in the next stage.
And after the Lebanese government approved a reform plan through which it hopes to obtain external support estimated at more than twenty billion dollars to get out of the cycle of an accelerated economic collapse that put half the population under the line of poverty, two days ago the first formal negotiations sessions began with the International Monetary Fund.
“We are always calling for the liberalization of the lira exchange rate. They want to unify exchange rates and float, but the Lebanese government requested a transition phase that approves the flexible exchange rate before reaching the float,” he said Friday in an interview with “Agence France-Presse”.
“We have to adjust the stabilization policy to the flexible exchange rate policy in the first stage and for the foreseeable future, and when we have financial support from abroad, we will float,” he added.
The consequences of instant flotation
According to my weight, the government fears several consequences of the immediate buoyancy, including the “significant deterioration in the lira exchange rate”, which exceeded the threshold of four thousand against the dollar on the black market, while the official price Fixed at 1507 pounds.
The flexible exchange rate policy is based on what my weight explains “in a gradual increase in the price of the dollar” against the lira, in a step that requires “coordination between the government and the Bank of Lebanon.”
The current economic crisis in Lebanon is the worst since the civil war (1975-1990), and is the result of years of slow growth, with the state’s inability to undertake structural reforms, the fall of public services, and widespread corruption. in public institutions.
The economic collapse coincides with a severe liquidity crisis and a tightening of the dollar since last summer. This was reflected in the diminishing purchasing power of the Lebanese people to a great extent and in the increase in the prices of consumer goods by 55 percent, according to official estimates.
Lebanon is confident in its negotiations with the International Monetary Fund on the austerity plan, which was approved by the government late last month and spans more than five years. Reforms are proposed at various levels, including fiscal policy, balance of payments and infrastructure, and debt and bank restructuring.
Regarding the restructuring of the banks, Wuzni said that “it would be done step by step,” speaking of “various treatment options, including consolidation, which is normal.”
He said: “There are 49 commercial banks in Lebanon, and it is normal for their number to drop to about half in the next stage.”
The government approved its plan months after the Lebanese took to the streets, denouncing the political class, which they blame for corruption and for failing to address crises.
Lebanon is under a public debt burden equivalent to more than 170 percent of its GDP, and is therefore considered one of the most indebted countries in the world.
