IMF rescue ‘mandatory’ for Lebanon recovery

A handout picture provided by the Lebanese photo agency Dalati and Nohra on May 6, 2020 shows Lebanon’s President Michel Aoun Diab attending a meeting with the heads of the parliamentary blocs at the presidential palace in Baabda, east of Beirut. – Lebanese President Michel Aoun said that financial assistance from the International Monetary Fund was “mandatory” for an economic recovery, as the country sinks deeper into financial turmoil. Lebanon is in the thick of its worst economic crisis since the 1975-1990 civil war, compounded by the COVID-19 coronavirus pandemic. (Photo by – / DALATI AND NOHRA / AFP) /

Lebanese President Michel Aoun said Wednesday that financial assistance from the International Monetary Fund was “mandatory” for an economic recovery, as the country sinks deeper into financial turmoil.

Lebanon is in the thick of its worst economic crisis since the 1975-1990 civil war, compounded by the coronavirus epidemic.

Forty-five percent of Lebanon’s population now lives below the poverty line, and tens of thousands of people have lost their jobs or seen their salaries slashed as a result of the downturn.

Aoun on Wednesday met with most heads of the country’s main parliamentary blocs to discuss the broad outlines of an economic reform plan that the government adopted last week but parts of which still require parliamentary support.

The economic roadmap comes with a government request for IMF assistance, which Aoun called “a mandatory path for recovery if we negotiate well and we are all fully committed to… reform”.

Parliament speaker Nabih Berri and Samir Geagea, head of the Lebanese Forces, a Christian political party, were among the attendees.

But political heavyweights such as former prime minister Saad Hariri boycotted the session over objections to the current government’s approach to the economic crisis.

Aoun said the rescue plan was not the responsibility of a single group or party.

“Getting out of the dark tunnel that we are crossing is everybody’s responsibility,” he said.

This reform plan, the president said, “aims at correcting the structural imbalances” of a free-falling economy, but its success requires “sacrifices”.

The roadmap –- long seen as a prerequisite for external financial aid –- aims to reduce Lebanon’s enormous public debt burden from 170 percent of GDP to less than 100 percent.

It calls for a restructuring of the banking sector and the country’s enormous debt pile, as a well as tax hikes and a freeze in state hiring, among a raft of other reforms.

It comes against the backdrop of a series of economic woes, which include a dollar liquidity crunch, soaring inflation, the country’s first sovereign debt default and a devaluation of the Lebanese pound.

The pound has been selling for more than 4,000 to the dollar on the black market in recent weeks in a record low.

Although the official exchange rate remains fixed at 1,500 to the dollar, the government’s reform plan is based on an exchange rate of 3,500 to the greenback.

“What we are offering is not a sacred text, it can be developed” further, Prime Minister Hassan Diab said at the meeting.

“We are presenting this plan to you because it is not the property of the government,” he said. “It is a work programme for the state.”