Economic crisis: "Without the IMF, Lebanon is going to hell"

Without multibillion dollar aid from the International Monetary Fund (IMF), will Lebanon plunge into "hell"? Negotiations with the institution have stalled, in the absence of implementation by the Lebanese government of crucial reforms to stop the economic collapse of the country. 

Lebanon is experiencing the worst economic crisis in its history, aggravated by the global pandemic of Covid-19 and a delicate political context exacerbated by the tensions between the United States and Hezbollah, the Shiite armed movement allied with Iran, which dominates Lebanese political life.  

In recent months, tens of thousands of Lebanese have been dismissed or suffered wage cuts. The Lebanese pound is in free fall, as is the purchasing power of the population. And savers do not have free access to their money, the banks having imposed draconian restrictions on withdrawals and transfers abroad because of the shortage of dollars. 

In default of payment, Lebanon adopted a reform plan at the end of April to negotiate IMF aid, likely to restore some confidence to other donors. But, after more than two months and 16 sessions of negotiations between the Washington-based institution and the Lebanese government, the talks are stalling. 

"The IMF has left the negotiation session," said a Lebanese negotiator, who asked not to be named. 

Another Lebanese source close to the case castigates the louvoisements of Lebanese officials. "No one (of them) wants reforms", however, demanded for decades. "Each faction fights for its own interests and lets the country sink." 

Carelessness is not surprising, in a country subscribed to repeated crises, torn between various foreign influences and where parties are used to endless bargaining. 

The Lebanese leaders themselves are accused of profiting from a system plagued by clientelism and corruption, all faiths combined. 

 "Burn the country" 

There is "a very powerful lobby" ready "to burn the country to avoid exposing all that it has committed," accuses the negotiator. 

The hour is serious, however. Almost half of the approximately four million Lebanese live in poverty and 35% of the working population is unemployed. 

The ras-le-bol started in October 2019 a new protest movement against the entire political class, unchanged for decades. 

To date, Beirut is hoping for about $ 10 billion in IMF assistance. But during the negotiations, a parliamentary committee and the government even diverged on the estimate of the public deficits, those of the Central Bank and those of the banks: from 60,000 to 241,000 billion Lebanese pounds (tens of billions of dollars). The IMF has requested only one assessment. 

The last session "went very badly," confirms a Western source familiar with the negotiations. The IMF asked "to stop taking them by boat". 

Suddenly, two senior government officials participating in the negotiations resigned. 

The next session, purely technical, must address the thorny issue of the electricity sector - a financial chasm. 

"Help us help you, damn it!"  

"Nothing is moving" was alarmed this week the head of French diplomacy Jean-Yves Le Drian by announcing an upcoming visit to Beirut. "Help us help you, damn it," he said to the Lebanese political class on Thursday before the French senators.

"The awareness of the risk of collapse is very clearly insufficient on the part of all the Lebanese political partners," he added shortly after before the Senate Foreign Affairs Committee.

His American counterpart Mike Pompeo told him that his country "supports Lebanon as long as it carries out the good reforms and it is not under the control of Iran." 

Among the expected reforms: reduction of public spending and increase of revenues, through the collection of taxes and the fight against smuggling. 

But "there is no political will," insists analyst Nasser Yassin. Any change would deprive politicians "of their power, their control over the state, the economy and society." 

The IMF is awaiting an audit of the Central Bank accounts and a regulation of informal capital controls. He calls for a floating of the national currency, to eliminate the chasm between the official exchange rate (1 507 pounds for a dollar) and a black market where the dollar is traded at 9 000 pounds. 

A failure of negotiations with the IMF would also hamper the release of $ 11 billion in aid promised in 2018 at a conference in Paris. 

According to the Western source, there could be no alternative to negotiations with the IMF. "The country is collapsing. You need the IMF label to get you back on track for good repute." 

Same observation for the Lebanese source close to the file. "With an exchange rate that is spinning and nothing" stops, and "without the IMF, Lebanon is headed for hell". 

 With AFP  

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