Beirut (AFP)

Shaken by an acute economic and monetary crisis, Lebanon will adopt a floating monetary regime advocated by the International Monetary Fund (IMF), but after obtaining crucial external aid, Finance Minister Ghazi told AFP on Friday Wazni.

The Lebanese pound, indexed to the US dollar since 1997 at the fixed rate of 1,507 pounds for one dollar, has experienced a sharp depreciation in recent months, crossing in April the threshold of 4,000 pounds for one dollar in exchange offices.

The two currencies are used daily in Lebanon, an over-indebted country and plagued by an economic crisis unprecedented since the end of the civil war (1975-1990).

The economic sinking was one of the triggers in October 2019 of an unprecedented uprising against the entire political class, almost unchanged for decades, accused of corruption, incompetence and of having pushed the country to the brink of chasm.

Anger has increased after drastic restrictions on dollar bank withdrawals and skyrocketing prices, exacerbated by containment due to the Covid-19 pandemic.

"The IMF demands (...) a floating exchange rate, but the Lebanese government has requested a transitional phase," Wazni said in an interview with AFP.

"We will initially adopt a flexible exchange rate policy in the near future, and when we receive external financial support, we will move to the (floating) rate," he said, anticipating "a gradual increase "of the dollar / pound rate in" coordination with the monetary authorities ".

After weeks of procrastination, the Lebanese government finally asked for help from the IMF in early May. He began negotiations with the monetary institution this week for crucial aid as part of a rescue plan adopted in late April.

- Nine billion in aid -

Immediate liberalization of the monetary regime risks, according to Wazni, leading to "a rapid deterioration of the exchange rate" when inflation is expected to reach 53% in 2020.

Negotiations are continuing with the IMF to discuss "details of the bailout", including tax reforms.

"Lebanon's quota in the Fund is approximately $ 870 million. Lebanon hopes to obtain ten times this amount, or approximately $ 9 billion in aid, thanks to the support of brotherly and friendly countries. "added the Minister.

"The more we speed up negotiations, the better (...) An agreement with the IMF gives credibility to the government's plan, opens the way to international support conferences and facilitates negotiations between Lebanon and the creditors, in addition to direct financial support, "he said.

The bailout plan also provides for debt restructuring of $ 92 billion (170% of GDP) after the announcement in March of the first default in the history of Lebanon.

Negotiations with creditors began two weeks ago, said Wazni, without specifying which ones.

- Erase debt -

"The government's plan evokes the abolition of sovereign debt owed (by the state) to the Banque du Liban (BDL) and commercial banks in the amount of $ 38 billion."

He also plans to restructure the banking sector, which "will be done step by step," added Wazni. "In Lebanon, there are 49 commercial banks, it is normal that this number is reduced by almost half during the next stage."

The plan, he continued, lays the foundation for a transition to a productive economy that can create many job opportunities.

The minister also mentioned the existence of a new bill on capital control, after months of informal restrictions imposed by banks on withdrawals and transfers.

The plan should be approved by parliament in the coming weeks, he said.

Wazni said the bailout has been endorsed by several countries, including the United States, which considers the pro-Iranian armed Shiite Hezbollah movement, the heavyweight of Lebanese politics, to be a "terrorist" organization.

"It is a technical, financial, economic roadmap, not a political document," said Wazni, stressing the absence of "political conditions", alluding indirectly to the strong influence of Hezbollah in the government.

© 2020 AFP