Beirut -
The Lebanese are awaiting the year 2023 with much anxiety and suspicion, and it will bring them to a new peak in the course of a dramatic collapse that has not subsided since the fall of 2019, and they are preoccupied with what their living situation will become, after the collapse of the lira at the end of 2022 reached a shocking level, with the exchange rate of one dollar exceeding 46 thousand.
Observers are wondering about the fate of the negotiations with the International Monetary Fund to obtain an aid program ranging between 3 and 4 billion dollars, at a time when its conditions have not been fully implemented, and it is an issue that becomes more complicated with the presidential vacancy after the end of former President Michel Aoun’s term, and the parliament’s inability to legislate and narrow borders. The powers of the caretaker government, in addition to the exacerbation of political differences and conflicts of stakeholders over how to get out of the crisis.
In parallel, the year 2023 will witness the end of the term of the Governor of the Banque du Liban, Riad Salameh, in May, to end a term that continued to be extended continuously for 33 years, while Salameh is being pursued by court cases internally and externally. Observers believe that the end of his term and the political incompatibility over a name that will succeed him will fuel conflicts and crises.
In anticipation of the fate of the most prominent economic and financial issues for the year 2023, Al Jazeera Net interviewed: the former Minister of Economy and banker Raed Khoury, and the analysts and economists Ali Noureddine and Munir Younes.
What are the most prominent economic and financial challenges that Lebanon will face in 2023?
Minister Khoury believes that during 2023 the same economic and financial challenges since the fall of 2019 will complete, and will worsen in the absence of the state's vision and the depletion of what remains of the central reserve, which fell over 3 years from $33 billion to less than $10 billion at the present time.
Here, Noureddine refutes the challenges of the year with several merits, most notably:
How Lebanon completes the terms of the understanding at the staff level with the International Monetary Fund, before moving to the final understanding, and if Lebanon does not fully implement the conditions (this) means that the agreement will not be completed this year.
The right to exit from the presidential vacancy, because the caretaker government is unable to take fateful decisions such as restructuring the public debt, and Parliament is unable to legislate to implement the laws required by the IMF.
The most important merit: the termination of Salama’s mandate, and in light of the presidential vacuum, it will be difficult for the government to appoint a new governor for the central, in return for the refusal of political forces to assume the powers of the governorship by proxy, the first deputy in the central, Muhammad Baasiri, because it is a site designated for the Maronite sect, and because a vacancy in the governorship is not possible and has serious monetary repercussions, which may Generate a political clash over how to agree on an alternative to Salameh.
Entitlement to restructure the banking sector through the completion of two parliamentary laws: the emergency law to restructure the banking sector and the law to reorganize the financial sector, which must determine how to classify and deal with withheld deposits.
For his part, Yunus finds that the most dangerous thing in 2023 is the state of inflation, which has increased cumulatively by 1400%, and is likely to escalate after the imposition of huge tax fees in the 2022 budget, and the adoption of a new price for the customs dollar of 15 thousand, after it was for decades 1507 pounds.
The economist said that family budgets have become dollarized, while their salaries in lira are eroding in value, which means a deepening of poverty that affects more than 85% of the population, explaining that those with salaries in dollars from private sector employees will face great suffering if the work continues to impose huge taxes on their salaries that reach up to 25%. .
How will the future of the lira be in 2023?
Khoury considers that the Central Bank does not have a magic wand to solve the lira crisis, and that the state's failure to carry out radical reforms means its continued collapse without limit or ceiling.
And he says: Nothing indicates that the lira will follow a different path, blaming the central bank for what he calls "arbitrary circulars, wrong intervention in the black market, and the failure of a banking platform to control the money market." He added that the corrective path for the lira begins with reorganizing the financial sector and restructuring public debt.
Yunus links the continued collapse of the lira to an increase in imports, which led to an increase in the demand for dollars, and thus: an increase in demand for a banking platform that provides dollars from two sources: the central reserve or the black market.
As long as the balance of payments remained incapacitated during 2023, the lira will continue to collapse, according to Younis, noting that the lira lost about 96% of its value.
What are the living challenges facing the population in 2023?
Yunus asserts that the collapse of the lira and the rise in inflation will result in a massive rise in the prices of basic goods and services.
And Noureddine added that this will automatically lead to the erosion of the value of salaries in the absence of a comprehensive salary correction process outside the temporary aid policy, which means a sharp decline in purchasing power, especially among public sector employees.
He says: The situation will multiply the crisis of paralysis in public administrations, and with the judicial retreat, the completion of commercial transactions will continue to be disrupted, meaning that the Lebanese investment environment is in almost complete stagnation.
What are the challenges facing banks in 2023?
Khoury says that banks were historically the levers of the economy in Lebanon, and today they are complaining of a systematic beating of their existence and role.
And he refuses to restructure the banks in the current proposed formula, "because it will lead to the write-off of deposits, while their recovery must be through the state."
However, Noureddine finds that the challenge of banks is the crisis of accumulated losses in the sector, which the government estimated at about $73 billion, which is the difference in the consequences of the sector for depositors in hard currency and the liquid and liquid assets it possesses, and this gap is the crux of its crisis.
He says that dealing with it is through a comprehensive restructuring of the sector, by zeroing the losses, distributing them fairly, setting certain priorities for how to deal with deposits, and determining the fate of the funds that fled abroad after the fall of 2019. This assumes that “the most deserving categories of losses will begin to be loaded from the owners of illegal enrichment.” and tax evaders.
Younis expects that 2023 will witness more bank intrusions, and that lawsuits against the central governor and banks will intensify.
According to him, by adopting a new official exchange rate in 2023, which is 15 thousand dollars, banks will face a major crisis in their capital, which was estimated at a price of 1507 pounds.
Are there any developments that depositors' funds may witness in 2023?
With the inability of the parliamentary blocs to agree on approving the "Capital Control" bill, Yunus rules out its approval, "it is not accompanied by a clear and fair plan to determine losses and responsibilities."
Khoury says that the total value of deposits on paper amounts to about 100 billion dollars, and there are only 10 billion of them. ".
He adds: It is not required to sell all the assets of the state, but to invest them with the private sector in order for their value to rise. For example, 10% of the land area of Lebanon belongs to the state, and most of it is unoccupied.
The former Minister of Economy rejects what the IMF requests in terms of writing off deposits, and says that the Lebanese negotiating team is not working to present an alternative vision that preserves the rights of everyone, led by depositors, considering that investing in state assets will be a solution to return deposits and the rise of the banking sector.
For his part, Noureddine says that every positive development in the issue of depositors will not be achieved without the approval of the bank restructuring law, ruling out the authorities dealing with losses in 2023, "because a large part of the political forces in Parliament are largely aligned with the interests of bankers."
Will the authorities be able to agree with the IMF in 2023?
Khoury says, "I have no hope of signing the agreement soon, considering that the fund goes for easier solutions, such as writing off deposits."
Nevertheless, he believes that Lebanon's agreement with the Fund is necessary to get out of its crisis, "but in a way that guarantees the rights and interests of the Lebanese."
Noureddine believes that it is difficult to sign the agreement as a result of the presidential vacancy and the subsequent paralysis of the legislative and executive authorities. He states that the fund has conditions, the most prominent of which are:
The government is working on a strategy to restructure the banking sector, and it was included in its recovery plan, but it is witnessing amendments that were not completed in the final version of it, and the parliament approved it after studying it at the Central Bank.
Conducting 14 audits of the balance sheets of the 14 largest banks, which was not completed under the pretext that there were no auditing firms to agree financially with.
An amendment to this bank secrecy law accomplished the audit of the balance sheets of the Banque du Liban.
Developing a strategy to restructure the public debt has not been worked on.
Completion of the 2022 budget.
Yunus believes that no one in power has an actual desire to implement all the conditions, and he expects that next year will witness threats of imposing sanctions on officials if they continue to obstruct the agreement.
Will Lebanon witness an improvement in electrical supply in 2023?
In November, Lebanon witnessed a 10-fold increase in electricity tariffs in return for promises to provide power for about 8 hours, but its interruption lasts for more than 20 hours per day, and energy saving is one of the biggest crises of the population.
Noureddine says that the tariff increase may not contribute to providing large revenues to increase nutrition and finance the Electricité du Liban Corporation, which needs operating capital.
He wonders if the Central Bank is able to continue selling the institution dollars that need funds from the state.
Although Lebanon signed two agreements to supply it with electric power from Jordan and Egyptian gas via Syria, with a financing loan from the World Bank, their fate is still pending, for political reasons related to the request for official exemptions from the “Caesar” law sanctions on the one hand, and because Lebanon did not implement the bank’s conditions in terms of auditing the Electricity Corporation. And repairing technical waste on the other hand, according to Younis.
This economist believes that the provision of electricity depends on the renewal of the agreement to import Iraqi fuel, ruling out that the supply will reach about 8 hours without radical reforms in the Electricity Corporation, which are also required by the Monetary Fund.