strengthen its balance sheet and require banks to build up their own buffers further. They viewed that fiscal measures should include raising the deficit over the medium term. reforms are important first steps, they saw the need for decisive actions All rights reserved. and into 2019. It’s the biggest regulated Ponzi scheme, with over $75 billion in play,” Azzi underlined. While the approval of the 2019 budget by Use the free Adobe Acrobat Reader to view this PDF file. IMF Members' Quotas and Voting Power, and Board of Governors, IMF Regional Office for Asia and the Pacific, IMF Capacity Development Office in Thailand (CDOT), IMF Regional Office in Central America, Panama, and the Dominican Republic, Financial Sector Assessment Program (FSAP), Currency Composition of Official Foreign Exchange Reserves. http://www.imf.org/external/np/sec/misc/qualifiers.htm Without a deal, banks, which are directly exposed to the Lebanese sovereign debt, will have to write off their losses from their balance sheets. Central Banks external position. implementation of the government’s Capital Investment Plan, financed on In this regard, they commended the The resignation of the fourth Lebanese negotiator with the International Monetary Fund (IMF) is an indicator they might right. Directors noted that the fiscal adjustment effort needs to be complemented Middle East and Central Asia Dept. Executive Board Assessment “Further lirification will wipe out people’s wealth. On May 11, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the 2018 Article IV consultation with Lebanon. While financial stability has been maintained, deposit inflows, critical to finance the budget and external deficits, slowed down during the past year, reducing the authorities’ room for maneuver. stability while emphasizing the need to rebuild its financial strength. here: The disagreement over losses between the government and the central bank threatens the future of the IMF deal. “They don’t want an IMF deal for different reasons. bilateral discussions with members, usually every year. Clients do not have free access to their dollar deposits and can’t make international transfers, and it does not look like it’s going to change soon in the current apathy of the state.”. The budget approved by Parliament in July 2019 targets a deficit of 7.6 with Lebanon. The parliament has approved a plan to reform the electricity sector and reduce its fiscal cost as well as a budget that aims to reduce the overall fiscal deficit in 2019. However, foreign lenders could have a better chance with an international recourse. Phone: +1 202 623-7100Email: MEDIA@IMF.org. Negotiations with the IMF have also been rocky as the central bank, and the government failed to agree on the size of losses set out in the plan. Sign up for the Week in Review newsletter. by fundamental structural reforms to raise growth and improve Lebanon’s Lebanon’s economic growth slowed to around 0.3 percent in 2018 on the back Other laws approved include a code of Sources substantial contraction in the real estate sector. They don’t want to open their books, they don’t want to do reforms, they don’t want to do capital control or go after ill-gotten money,” he told Al-Monitor. Henry Chaoul, a financial adviser who represented Lebanon’s government in talks with the IMF before his resignation in mid-June, said he believes that some politicians do not want to do the necessary reforms. sector plan and legislative process on the government’s CEDRE vision As all players maintain the status quo, which equates to doing nothing, the problem is resolving itself in Darwinian fashion, he said, with the fittest or the strongest "wasta" (obtaining privileges through connections) surviving. reforms could encourage donor disbursements of concessional financing for The link to reset the password will be sent to your email address. In Lebanon, things are nonetheless quite different. On July 13, the IMF warned the Lebanese authorities that delaying reforms would worsen the already dire economic outlook. authorities’ primary surplus goals and rebalancing the economy will require Executive Board. Inflation International Monetary Fund. Morcos explained that they have judicial recourse in New York and London. Chairman of the Board, summarizes the views of Executive Directors, Most high-frequency Directors also called on the authorities to address “There is no will, no vision on their part,” he said. Fund (IMF) concluded its 2019 Article IV consultation On September 11, 2019, the Executive Board of the International Monetary [1] Directors commended the Banque du Liban (BdL) for maintaining financial According to the Financial Times, the IMF has advised Lebanon that its central bank has accumulated losses of as much as $49 billion, figures the central bank and the parliament played down. AML/CFT measures efficiently to continue to mitigate risks and ensure a Lebanon: Selected Economic Indicators, 2018–24, (Annual percentage change, unless otherwise indicated), Interest rates (period average, in percent), (In percent of GDP, unless otherwise indicated), Exports of goods and services (in US$, percentage change), Imports of goods and services (in US$, percentage change), Gross reserves (in billions of U.S. dollars) 4/, In months of next year imports of goods and services, In percent of short-term external debt 5/, In percent of banking system foreign currency deposits, In percent of total banking system deposits, Nominal GDP (in billions of U.S. dollars), Non-resident deposits (staff estimate, percent change), Commercial bank total assets (percent of GDP), Real effective exchange rate (annual average, percent that Lebanon needs continued international support. concessional terms, could help mitigate the contractionary effect of the The BdL has continued its financial operations to facilitate banks Directors emphasized the need for a multi-year fiscal adjustment to reduce and this summary is transmitted to the country's authorities. 2019. governance weaknesses that increase Lebanon’s vulnerability to corruption. All rights reserved. You’re now subscribed to Al-Monitor. The inflation rate reached nearly 60% in May. acknowledged that Lebanon has shown unique resilience in the face of [2] [1] “While obstacles such as sovereign immunity prevent them from prosecuting or freezing Lebanon’s assets they may try to seize the central bank’s assets,” he said. They The resignation of the fourth Lebanese negotiator with the International Monetary Fund (IMF) is an indicator they might right. positive MENA Financial Action Task Force assessment. Al-Monitor - Intelligence on the trends shaping the Middle East. to remove growth bottlenecks and enable external adjustment in the context Yet, Talal F. Salman, an economic adviser to the Finance Ministry and lead Eurobond negotiator, submitted his resignation from the IMF talks on Aug. 30, he was the fourth to quit in the last few months. Under Article IV of the IMF's Articles of Agreement, the IMF holds parliament is an important first step, Directors noted that achieving the All rights reserved. assumptions in the budget about growth and the impact of revenue measures. Parliament has approved a plan to reform the electricity sector The Lebanese pound has lost over 80% of its value to the dollar in recent months. Central Bank of Lebanon Gov. Lebanese bankers do not seem to all share Salameh's optimistic account. nonresident deposits. short-term nonresident deposits. reserves. Staff They prefer that people with large and midsize deposits carry the loss instead,” Chaoul noted. credible measures–both on the revenue and expenditure sides—and sustained adjustment on growth. Banks don’t want [an IMF] bail-in that will result in [the] dissolution of their ownership [as larger depositors will be given instead shares for their money],” Chaoul said. Sign up to receive free e-mail notices when new series and/or country items are posted on the IMF website. Economic conditions increasing fuel excises and eliminating electricity subsidies. While financial stability has been maintained, deposit inflows, critical to finance the budget and external deficits, slowed down during the past year, reducing the authorities’ room for maneuver. Economic growth The Lebanese ruling elite is still bargaining over the economic reforms required by the IMF, which are also a cornerstone to any international debt restructuring. 2018. Here's what you can now access. International lenders could be luckier than Lebanese lenders. GDP in 2018, up from 8.6 percent of GDP in 2017, partly due to an increase explanation of any qualifiers used in summings up can be found exacerbated Lebanon’s challenges. While the approval of the new electricity They encouraged the BdL to step back from quasi-fiscal operations, commerce and a law on judicial intermediation. Deposit inflows, which finance Lebanon’s twin deficits, slowed down in IMF Members' Quotas and Voting Power, and Board of Governors, IMF Regional Office for Asia and the Pacific, IMF Capacity Development Office in Thailand (CDOT), IMF Regional Office in Central America, Panama, and the Dominican Republic, Financial Sector Assessment Program (FSAP), Currency Composition of Official Foreign Exchange Reserves, http://www.imf.org/external/np/sec/misc/qualifiers.htm. Free Download. Paul Morcos, attorney at law and founder of the Justicia law firm, told Al-Monitor he believes that this political class has no intention of putting an end to the clientelist system that it has so carefully crafted to its advantage.