Deposits are a controversial point with the IMF

Patricia Jallad wrote in “Call of the Nation”:

The bridges of trust that the outside world extended with Lebanon after the presidential elections and the appointment of a prime minister to form a new council of ministers began to be translated, albeit in a limited way on the ground, through supportive Gulf and Western messages and positive atmospheres about Lebanon’s future. But confidence must be nurtured by external guarantees. From here, the biggest question arises: Is signing an economic program agreement with the International Monetary Fund still a must, or can the international community and creditors be satisfied with the government’s recovery plan to “open the tap” of support for Lebanon?

In light of the political changes taking place in Lebanon since the election of President Joseph Aoun, opinions have begun to differ on the necessity of signing an agreement with the International Monetary Fund or not, and being satisfied with the economic recovery plan expected to be approved by the new government, which will be considered a source of confidence for the outside world rather than the inside.

Those who believe that an agreement will not be signed with the IMF in the next stage attribute the reason to the Fund’s desire, within its program, to write off entire deposits, which is unacceptable and unacceptable, and to place external debt among the priorities. Those who support compatibility with the Fund consider that signing a program with the Fund is a necessary path for Lebanon’s return to global markets.

Thus, opinions began to conflict about the necessity of agreeing with the Fund or not, in light of the current international political support for Lebanon, which will later be translated into support for reconstruction.

The extent of the generosity of the countries supporting Lebanon in the next stage does not depend, as former Deputy Prime Minister Representative Ghassan Hasbani stated during his speech to “Nidaa Al-Watan,” “on the extent of the Lebanese state’s desire to agree with the International Monetary Fund. Signing an agreement with the Fund is an essential entry point.” For financial recovery if the countries concerned with supporting Lebanon attach importance to this, and place it, as before, as a precondition for their support for Lebanon. He stressed the need to “differentiate between future entitlements, which are:

1. Reconstruction financing, which was linked to the implementation of the ceasefire agreement, international resolutions, and the state’s return to normal work.
2. Financial support for recovery was linked to the IMF program and reforms, and included external investments, grants, and loans.

With regard to foreign investments, donations and loans, the nature of support may differ from one country to another, but a reform program approved by the IMF can contribute to enhancing Lebanon’s chances of obtaining financial support consisting of a mixture of gifts, loans and investments.” So each of these methods of support has its requirements.

Loan requirements

Loans require the ability to repay them, especially since the Lebanese state has obligations such as Eurobonds and debts from multiple sources that accrue interest and debt service that must be repaid.”

This ability to pay state salaries requires, according to Hasbani, “major reforms in the public sector to reduce waste and spending and increase imports by collecting them fully from customs and uncollected fees in full, before introducing new taxes and fees that may harm the economic recovery required to revive financial recovery.”

…and giveaways

With regard to donations, they are linked to the extent of trust enjoyed by the ruling class by the donor countries, and are usually based on supporting health, social matters, and reconstruction, and are linked to a lesser extent to a program approved by the IMF, because they usually come based on a political decision to support the state. It may be directly linked to the political and reform performance of the authority, and it can affect the results of the elections if they come, or a promise is made, before the parliamentary elections are due. Therefore, they must be dealt with by the supporting countries carefully and linked to performance. And transparency.”

Investments

Investments remain, and in this context, Hasbani points out that “it is difficult for them to come to Lebanon except in limited and individual sizes in the absence of major investment opportunities, which require restructuring in the organization of the sectors that attract these investments in the hundreds of millions or even billions.” These sectors include: communications, energy, ports, airports, and productive infrastructure, followed by industry, tourism, and other sectors. Any recovery program must take into account these structural and regulatory reforms that attract investments, regardless of whether it is in agreement with the IMF or without it.”

Negotiating with the Fund

In conclusion, Hasbani believes that “it is necessary to develop an integrated plan for recovery that takes into account the priorities of the Lebanese, to be negotiated with the IMF, to benefit from the current international momentum that is in keeping with the covenant without arranging harsh obligations on Lebanon, especially with regard to the rights of depositors and the distribution of responsibilities and losses.” Knowing that a number of private investment funds (which buy distressed debts) now own the largest total of Eurobonds and aspire to have priority given to them over the Lebanese depositor, this is one of the things we must pay attention to in negotiations with the IMF.”