LIFE is alarmed by the lack of any meaningful progress towards economic reform in Lebanon. This policy paralysis is especially disconcerting in the face of a clear acceleration in the economic and financial meltdown and the faltering negotiations with the IMF. As a result, LIFE renews its calls for all stakeholders, including the government, the parliament, the Banque du Liban, the Association of Banks in Lebanon, representatives of civil society and the political opposition, to come together and work towards the following:
- Accelerate economic reforms: We urge an immediate implementation of long needed structural economic reforms and budgetary adjustments aiming to stop the fiscal “haemorrhaging,” which worsens the country’s predicament by the day. Many such reforms can be adopted immediately and regardless of any discussions with the IMF.
- Prioritise negotiations with the IMF: Any stabilisation and recovery plan will require a large capital injection into the Lebanese economic system. A well thought through IMF program would represent the cornerstone for potential future inflows. Local stakeholders, namely the BDL and government, need to come together, use one set of credible numbers and speak with one voice in order to engage more effectively with the IMF. A well negotiated IMF program will mitigate financial sector losses and could unlock other sources of foreign investments, without which the adjustment process will enduringly debilitate Lebanon’s economy.
- Implement a holistic financial sector restructuring plan: Lebanon’s financial sector losses, as diagnosed in the government’s economic plan, are a sad but undeniable reality. Empirical evidence suggests that gradualism is not effective as any economic recovery will be hampered by an ailing financial system. Lebanon’s only remaining option is to recognise those losses, distribute them equitably and lawfully within a holistic financial restructuring plan to be applied on a bank by bank basis.
- Execute a comprehensive electricity reform strategy: A credible electricity reform plan is essential to improving Lebanon’s twin budget and current account deficits. The World Bank’s published plan (“Lebanon Power Sector Emergency Action Plan”) provides a credible and actionable framework that the government should start implementing immediately.
- Establish official capital controls: Official capital controls are long overdue and desperately needed not only to preserve BdL’s scarce foreign currency reserves but also to ensure that depositors are treated fairly. Capital controls must protect Lebanon’s supply of food, medical and other essentials, while supporting the economy’s productive sectors.
Lebanon has entered a dangerous phase bordering on a complete financial implosion. Further inaction will lead to catastrophic and long-lasting consequences that will destroy the country’s frail social and national cohesion. We urge all stakeholders to demonstrate commitment to implementing the necessary stabilisation measures.
Lebanon has run out of time.
LIFE
LIFE is a global network of Lebanese professionals working together towards a brighter future. As an apolitical, non-sectarian organization of Lebanese professionals, LIFE will continue to provide independent, objective and transparent views and advice and is not influenced by any other body, association, or party.