[Economics] The International Monetary Fund warns that Lebanon is passing through a “very dangerous moment”

[Guest High King Eslam]

The International Monetary Fund warned Thursday that Lebanon is passing through a “very dangerous moment” in light of an accelerating economic collapse, warning that failure to implement urgent reforms would plunge the country into an “endless crisis.”

Since 2019, Lebanon has witnessed an economic collapse, which the World Bank ranked among the worst in the world, and is considered the worst in the country's history. Lebanon and the IMF reached a preliminary agreement about a year ago on an aid plan that has not yet entered into force, with the authorities unable to implement urgent radical reforms.

At the end of a visit to Beirut, which included meetings with officials and several parties, the head of the Fund’s mission, Ernesto Ramirez Rigo, said in a press conference, “We believe that Lebanon is at a very dangerous moment, at a crossroads,” adding that the “existing situation and failure” to take the required measures would enter the country. The country is "in endless crisis".

In April, the fund announced that it had reached a preliminary agreement with Lebanon on an aid plan worth $3 billion over four years.

However, the implementation of the plan is linked to the government’s commitment to implementing prior reforms and the parliament’s approval of urgent draft laws, most notably the 2022 budget and the “Capital Control” law that restricts withdrawals and transfers of foreign currencies from banks, in addition to the approval of legislation related to restructuring the banking sector, amending the banking secrecy law, and unifying the exchange rate.

Although the authorities approved last year's budget and worked to amend the banking secrecy law, other urgent steps have not yet seen the light.

"Almost a year has passed since we reached an agreement," Rigaud said, noting that "the Lebanese have made progress, but unfortunately progress is very slow, given the complexity of the situation."

He added, “The country is in a major crisis, and much more was expected in terms of implementing and approving legislation” related to reforms.

The accelerating economic collapse three years ago coincides with an acute liquidity crisis and tight banking restrictions, with which depositors can no longer access their lingering savings.

On Tuesday, the lira recorded a historic collapse, with the exchange rate exceeding the threshold of 140,000 against the dollar, before it fell below 110,000, after the Banque du Liban issued a circular to limit the collapse of the lira, which lost nearly 98 percent of its value.

– “Small depositors are affected” –

Rigaud stressed that any solution to the current economic crisis must include amending financial policies, dealing with the losses of the banking sector and unifying the exchange rate, considering that "small depositors are the most affected ... and suffer more than they should."

And he considered that the existence of multiple exchange rates in Lebanon entails “many costs on the economy” and distributes “losses in a totally unfair way,” stressing the need to distribute losses between “the government, banks and depositors.” He called on the government to “stop borrowing from the Central Bank.”

Since the end of President Michel Aoun's term at the end of October, the Lebanese parliament has failed 11 times to elect a president due to deep political divisions. And no political party has a majority that enables it to deliver its candidate.

Political paralysis exacerbates the situation, with a caretaker government unable to take necessary decisions, including the reforms required by the international community and the International Monetary Fund to provide support in order to stop the bleeding.

The repercussions of the collapse did not spare any social group or sector in Lebanon. And while more than eighty percent of the population has become below the poverty line, the authorities have become unable to provide basic services and have largely stopped subsidizing key commodities, including fuel and medicine.

On the sidelines of his participation Thursday in a protest against the deteriorating living conditions in downtown Beirut, retired Brigadier General Khaled Naous (70 years) told AFP, "My salary was about four thousand dollars before the crisis, which is equivalent to $150 today."

He added, "We feel humiliated while trying to live a decent life because we are unable to secure the necessities of our home... We have reached a stage of despair, as the banks took our retirement compensations and we had no salaries left."

Source: France 24

https://www.i3lam-al3arab.com/صندوق-النقد-الدولي-يحذّر-من-أن-لبنان-يم/