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Ali Zainuddin wrote in the “Middle East”:
Lebanon’s economy is entering a new stage, starting next week, with the start of direct negotiations with IMF officials aimed at concluding a $ 10 billion financing program agreement, in parallel with the start of the implementation of the “financial and economic recovery” plan approved by the government, the final version of which will be adopted. In light of the observations of the International Corporation, the authorities and local authorities related to legislation, implementation, cash management and banking in the next five years.
The initial response from the Fund administration, which its President Kristalina Georgieva expressed during a telephone conversation with Prime Minister Hassan Diab, in which he informed him that the plan is an “important step forward”, created an optimistic atmosphere that could accelerate the reaching an agreement and obtaining the first support chip estimated at 3 Billion dollars before the end of this year, partly alleviating the shortage of foreign exchange and the heavy burdens on the usable reserves of the central bank.
However, these ambitions clash with the Lebanese state’s ability to adhere to the comprehensive reform agenda, in light of the disappointing experiences that the international community has previously experienced. A financial official assures Al-Sharq Al-Awsat that the Lebanese authorities must realize that contracting with the fund differs from previous deals with donor countries and institutions that have responded to requests for subsidies and support at the three conferences of Paris. The Fund ensures installment financing, in relation to the government’s progress in the implementation of the program based on the bilateral agreement.
According to information provided to local authorities who communicate directly with the International Financial Institution, the Fund delegation is expected to raise fundamental questions that are expected to reach Beirut in the middle of next week. Legislative and legal coverage to fill the financial gap and administrative and financial reforms are likely to receive priority attention and follow-up by Fund officials. . An investigation will be carried out into the extent to which the parliament and its main blocs responded to the approval of the laws that will be successively received by the government. Attention will also focus on the role of the financial sector, especially the monetary authority and the banking system, and its negative interaction so far with the proposed formula for loss distribution.
The issue of “floating” the lira exchange rate is expected to be among the list of priorities that fund officials will present, in light of the central bank’s fading ability to maintain monetary stability policy, which It adopted a fixed price for the dollar about 25 years ago. The issue of “floating” the lira’s exchange rate is also expected to be among the list of priorities to be presented by fund officials.
Public sector restructuring is also the most complex obstacle to the reform roadmap within the state and funding agreement. And there is advance information that fund officials may abandon the request to immediately stop this sector, which has more than 350,000 employees and contractors, and its cost, which controls approximately 40% of the general budget and approximately 73 % of initial expense, in exchange for a quick consideration to review the retirement system. And the end of the service.
On the side of the financial sector, the explicit position announced by the Governor of the Bank of Lebanon, Riad Salameh, arose from the non-participation of the monetary authority in the preparation of the government plan, which will raise additional questions about the harmony of the parties in charge of implement the plan’s financial and monetary mechanisms, while the Association of Banks is working to complete an alternative plan, Seeking to receive support from members and blocks in the House of Representatives, and will also deliver it to fund officials during their meeting in Beirut , or send it directly to the institution’s central administration in Washington.
In accordance with the main axes seen by the “Middle East”, the Association of Banks focuses on describing the government’s plan as not economic, but accounting, and in its current form it is “unconstitutional, and will produce legal challenges that will lead to failures judicial that hide critical aspects in it. ” Consequently, it is not possible to implement a legally questionable plan in any way ”, in addition to the unconstitutionality of infringing individual property. He also emphasizes that “the central bank is the property of the state, with its independence, which is the state bank and must recapitalize it. There is no precedent in all the countries of the world that are members of the International Monetary Fund, to recapitalize the central bank by the banks or their depositors.
He noted that the banks “insisted with the Bank of Lebanon, and with the Minister of Finance and the Speaker of Parliament, Nabih Berri, on the restriction legislation, and they all refused. Today, the plan calls for the recovery of money. While In terms of distributing realized losses amounting to around $ 105 billion, the Association of Banks indicates that the greatest burden will be placed on depositors in the segment whose savings exceed $ 500 thousand. The central bank was charged around $ 15 billion, and banks charged around $ 23 billion, by canceling their capital, raising fears of a large deduction (Haircut) that could reach 77 percent of large deposits, should the state to deny payment of its large debts Around $ 93 billion.
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