BEIRUT (Reuters) – A recovery plan Lebanon is negotiating with the IMF expertly diagnoses the bankrupt state s colossal losses but fails to commit to radical reform, the vital ingredient needed for a financial bailout of the country s sinking economy.
The 53-page rescue plan, agreed by the government in April after months of haggling, is recognised by officials, economists and diplomats as the most searching examination of how Lebanon came to pile up debts several times the size of its economy.
But sources familiar with the IMF talks say the plan fails to set out a clear roadmap of reforms for a patronage-ridden public sector, looted for decades by the sectarian power-brokers and former warlords who dominate Lebanon s confessionally-based politics and have run its state onto the rocks.
They believe the political elite will shy away from real reform as with four previous aid and soft-loan packages since Lebanon s civil war – and that they are underestimating how hard the IMF will push for deep changes before agreeing to help.
“They are trying to present a plan that the IMF will buy into, and that the international community and creditors will buy into, without really addressing the deeper problems in the country: reforms”, said Nasser Saidi, a former economy minister and vice-governor of the central bank.
“The current blueprint is extremely light on the reforms to the public sector,” adds Camille Abousleiman, an international finance lawyer and a minister who resigned from the last government over its reform failures.
The losses in the government document are startling. It estimates total sovereign debt at about $90 billion or 176% of GDP — one of the highest debt ratios in the world. It calculates total bank losses to be $83 billion and “embedded losses” at the central bank at over $40 billion.
The burden that these figures impose is rising with the rapid decline of economy, which shrank by 6.9% last year, according to the government, and will contract around 13.8% this year, with the coronavirus pandemic compounding the crisis.
One senior Lebanese government official claims that an agreement with the IMF is “70% done”. People familiar with the talks are not convinced, predicting gruelling negotiations.
LACK OF ENTHUSIASM FOR REFORM
Although the current government has respected technocrats, it is under the sway of sect leaders as much as the previous one – which was brought down by mass protests against corruption.
The difference is that this cabinet reflects more closely the power of Hezbollah, the Iran-backed Shi ite paramilitary movement which dominates Lebanon in alliance with the largest Christian party and the Shi ite Amal party. Pro-Western Sunni, Christian and Druze parties have stayed out.
There is, however, little difference in the lack of enthusiasm for reform of Lebanon s real ruling class.