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Link the financing of the economic plan to the restoration of the confidence of citizens by the state
The World Bank yesterday anticipated a meeting of a delegation from its regional administration with President Michel Aoun, directing accusations against “Lebanese lawmakers” and holding them responsible for the “deliberate stagnation” of the national economy. For economic recovery, trust must be restored between government and citizens, between government and investors, and between government and donors. The report accused Lebanese politicians of having “deliberately” delayed the adoption of effective reform measures. This led to a long and arduous recession.
“The lack of political consensus around national priorities seriously hampers Lebanon’s ability to implement long-term insightful development policies,” said Saruj Kumar Jah, Regional Director for Levante at the World Bank. “The new government must urgently implement a credible strategy to achieve macroeconomic stability, while taking short-term measures to contain the crisis and taking medium to long-term measures to face structural challenges,” he said.
In view of the difficulties in Lebanon and its lack of adequate foreign exchange reserves, the report considers that international aid and private investment are necessary for a comprehensive recovery and reconstruction. But he cautions that the mobilization, scope and speed of aid and investment depend on whether authorities and parliament can act quickly on public finances, governance and much-needed financial and social reforms. Without these reforms, neither sustainable recovery nor reconstruction can be achieved, and the socio-economic situation will continue to deteriorate.
Focusing on the precondition for the commitment of Lebanese policy makers to rebuild a more productive, equitable and resilient economy, the report offers a comprehensive reform roadmap for discussion. Its aim is to tackle the root causes of the economic crisis. It places governance and accountability reforms center stage, along with achieving macroeconomic stability, while seeking to rebuild trust. The plan includes five basic pillars including: a program for achieving macroeconomic stability, a governance and accountability reform package, an infrastructure development reform package, an economic opportunities reform, and a development reform package. of human capital.
During the diagnosis included in the report, it was stated that “the alleged lack of effective political measures by the authorities has exposed the economy to a difficult and prolonged recession, one year after the outbreak of the serious economic crisis in the Lebanon, which suffers a serious loss of resources, including human capital. The brain drain is an increasingly desperate choice. The current adjustment burden on the financial sector is particularly centered on small depositors lacking other sources of savings, the local workforce receiving their quotas in lira, and small businesses.
“The authorities disagreed with each other on the assessment, diagnosis and solutions to the crisis. The result was a large number of uncoordinated, not very comprehensive and insufficient measures in the field of public policies, which aggravated economic and social conditions. The government did not develop a fiscal policy consistent with a credible medium-term macroeconomic framework.
He also pointed out that the public sector’s call to rescue the financial sector is inconsistent with the restructuring principles that protect taxpayers. Meanwhile, the monetary authorities failed to address the currency crisis and high inflation. The government has not yet taken the necessary measures to alleviate poverty by addressing the social impacts of the crisis on poor and disadvantaged families by strengthening social safety nets.
It is probable, according to the forecasts of the authors of the report, that “poverty rates will continue to worsen, covering more than half of the population. As the contraction of GDP per capita in real terms and high inflation will lead to a significant increase in poverty rates and will affect the population through various channels such as the loss of productive employment opportunities, the decrease in real purchasing power and the suspension of international transfers. Highly skilled workforce is more likely to take advantage of potential opportunities abroad; This constitutes a permanent social and economic loss for the country ”.
The Puntland International Report expects the real GDP growth rate to decline sharply, reaching 19.2 percent this year, after contracting 6.7 percent last year, while the collapse of the currency led to rates. inflation rates that exceeded the 100 percent limit. Inflation acts as a severe regressive tax, disproportionately affecting the poor and disadvantaged, as well as people on fixed incomes such as retirees. The sudden interruption of the inflow of capital caused the depletion of the Central Bank’s foreign exchange reserves. The transfer of dollar deposits to the Lebanese pound and deductions from dollar deposits continue, despite the commitment of the Banque du Liban and commercial banks to protect deposits.
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