BEIRUT (Reuters) – Lebanon’s new government must reassure international donors it is serious about reforms to tackle a financial crisis as it looks initially to secure up to $5 billion in soft loans for basic goods, its finance minister said on Thursday. The government that took office on Tuesday faces an emergency in which banks have imposed controls, the Lebanese pound has weakened and protesters have turned to violence which a senior U.N. official described as “politically manipulated”. “The entire international community has its eye on what this government will do,” Finance Minister Ghazi Wazni said in televised comments. “What is its programme, what are the reform steps, is it ready for support or no?” Lebanon is looking to secure $4 billion to $5 billion in soft loans from international donors to finance purchases of wheat, fuel and medicines, The Daily Star newspaper had earlier quoted the minister as saying. “This injection will cover the country’s needs for one year,” said Wazni.
Bank restrictions on access to cash, inflation and job losses have hit people hard. Increasingly violent though more limited protests have replaced jubilant demonstrations against a political elite blamed for driving Lebanon towards collapse. Interior minister Mohammed Fahmi said the state would not tolerate attacks on security forces who he said would protect people’s rights, including freedom of expression. On Wednesday, protesters broke stone slabs off buildings in a luxury commercial district of Beirut to hurl at barricades guarded by security forces blocking paths to parliament. “This looks more like a political manipulation to provoke the security forces, to undermine civil peace, to fan up sectarian strife,” Jan Kubis, U.N. special coordinator for Lebanon, wrote on Twitter, mentioning attacks on security forces and vandalism of state institutions and private property. The new government was set up with backing from the powerful Iran-backed group Hezbollah and its political allies. Major political parties that have Western backing, including that of former premier Saad al-Hariri, are not part of the cabinet.
RESCUE PLAN
Hezbollah’s parliamentary bloc urged the government to hasten its rescue programme. The cabinet has formed a committee to draft a policy statement to be presented to parliament. Prime Minister Hassan Diab met several foreign ambassadors as the heavily indebted government looks to rally support. It must decide how to deal with maturing Eurobonds, including a $1.2 billion bond due in March. Diab’s office said British Ambassador Chris Rampling conveyed Britain’s readiness to support Lebanon but that the government “must show its commitment to reform that Lebanon needs urgently”. The European Union’s ambassador to Lebanon, Ralph Tarraf, said he had agreed with Diab on the need for Lebanon to “focus on economic files, address the crisis and institute structural reforms”, two local media outlets reported.
Political manipulation seen behind Lebanon violent protests: U.N. official
BEIRUT (Reuters) – Violence by some protesters in the Lebanese capital Beirut appears to be politically driven to undermine security and stability, a senior United Nations official said on Thursday. “This looks more like a political manipulation to provoke the security forces, to undermine civil peace, to fan up sectarian strife,” Jan Kubis, U.N. special coordinator for Lebanon, wrote on Twitter, mentioning attacks on security forces and vandalism of state institutions and private property.
France ready to support new Lebanese government
Paris, Jan 23 (Prensa Latina) The French government said on Thursday that it is ready to support the new Lebanese authorities in the reforms aimed at bringing the country out of the crisis. We will do our best in that direction, in a regional context marked by growing tensions, the foreign ministry said in a statement. According to the text, France reiterates its commitment to the sovereignty, stability and security of Lebanon, where a new government was installed on Tuesday, led by Prime Minister Hassan Diab, who replaced Saad Hariri after his resignation at the end of October. The difficult situation experienced by the country demands urgent measures from its authorities to regain confidence, he said. The French government recalled the outcome of the meeting of the International Support Group for Lebanon, held in this capital on 11 December, when participants pointed out the need for ‘far-reaching and ambitious’ reforms in sectors such as the economy, transparency and the fight against corruption. Multitudinous protests have recently shaken Lebanon, a scenario that could be maintained, considering that not a few accuse the new government of being unilateral.
Lebanese interior minister vows against attacks on protesters
BEIRUT, Jan. 23 (Xinhua) — Newly appointed Lebanese Interior Minister Mohammad Fahmi vowed on Thursday not to give the green light for security forces to attack protesters in the country, the National News Agency reported. “I guarantee that security forces will not attack anyone and it will exert all possible efforts to protect the freedom of expression and people’s rights,” he said during a handover ceremony held earlier in the day. Fahmi also called on protesters not to attack security forces or violate laws. “When people resort to violence, we will reach an uncontrollable chaos that cannot be contained in the future,” Fahmi said. Lebanon has witnessed severe clashes between demonstrators and riot police in the past couple of days in protest against the newly formed cabinet. Nationwide protests have started since Oct. 17 with demonstrators urging the formation of an independent cabinet free from any pressure by political parties and capable of dealing with the current economic and financial crisis.
What Might Be Required of Lebanon Under an IMF Bailout?
(Reuters) – Lebanon’s new government must decide whether to seek help from the International Monetary Fund to help ease its financial crisis. Any programme is likely to require Lebanon to agree to measures ranging from increasing taxes to fighting corruption. Based mainly on previous IMF recommendations, here are some steps Lebanon might have to take as part of any deal:
1. Draw up a medium-term plan to fill Lebanon’s yawning fiscal deficit and bring public debt down to sustainable levels. The IMF previously advised Lebanon to target achieving a primary surplus of around 4-5% of GDP to help cut its debt-to-GDP ratio, currently one of the highest in the world.
2. Rapidly raise revenues by hiking value-added tax and removing exemptions on items such as foreign-registered yachts, diesel used for electricity generation and road vehicles. Raising fuel excises is also recommended, as well as measures to improve revenue collection, such as reducing tax evasion.
3. Eliminating electricity subsidies is an area flagged by the IMF as the most significant potential expenditure saving. That would involve raising tariffs to close the state electricity company’s financial deficit as soon as possible to generate fiscal savings, possibly targeting the largest consumers first.
4. Scale up targeted transfers to the poor and vulnerable. To cushion the impact of the fiscal adjustment needed, the authorities should provide an additional 0.5 percentage points of GDP in social safety net spending, the IMF said in October.
5. Identify areas of saving by conducting a review of public spending. This could include reform of the public-sector wage bill and pensions which soak up a disproportionate chunk of revenue.
6. Carry out structural reforms, including lowering the cost of doing business by pushing through legislation spanning bankruptcy to public private partnerships. Push through reforms designed to boost the competitiveness of Lebanon’s small export sector to help maintain the currency peg. Increase electricity to 24/7 would remove one of the biggest impediments to doing business.
7. Strengthen the financial system by phasing out the support the central bank provides the government and bolstering the central bank’s balance sheet. That would also include requiring banks to raise their own capital buffers and bolster deposit insurance.
8. Crack down on corruption by enacting anti-graft laws covering areas such as illicit enrichment and the declaration of assets owned by officials. Set up an anti-corruption commission and investigate and prosecute corruption cases.
9. With the Lebanese pound having shed around a third of its value against the U.S. dollar on the black market, speculation has risen that the IMF might require Lebanon to break its currency’s peg to the dollar. Currency flotation has been a condition of some other countries, such as Egypt, accepting IMF funds in order to help make their economies more competitive. The government of former Prime Minister Saad al-Hariri in July denied the IMF had urged Lebanon to unpeg the pound.
(Reporting by Tom Arnold, Editing by Timothy Heritage)
