BEIRUT: The Word Bank Friday offered to help Lebanon overcome its economic crisis, the worst in decades, as Prime Minister Hassan Diab pledged to gain internal and external confidence in a bid to encourage international donors to extend financial aid to the cash-strapped country.
A World Bank delegation, headed by the regional director for the Middle East department, Saroj Kumar Jha, met separately with Diab and Finance Minister Ghazi Wazni to discuss the worsening economic and financial crisis, aggravated by an unprecedented popular uprising against the ruling political elite that has jolted Lebanon since October.
Jha discussed with Diab all financial and economic issues in Lebanon, a statement released by the prime minister’s media office said. The meeting, at the Grand Serail, was also attended by Wazni.
Earlier in the day, the World Bank delegation met with Wazni, discussing the “importance of finding appropriate solutions to the country’s financial and economic problems in order for Lebanon to be able to overcome the economic crisis and carry out the necessary reforms to stimulate the economy,” the state-run National News Agency reported.
Jha expressed “the World Bank’s readiness to assist Lebanon under the current financial circumstances,” the NNA said.
Wazni will meet Saturday with IMF Alternative Executive Director Sami Geadah, a Finance Ministry statement said Friday. The statement did not give further details on the nature of the upcoming IMF meeting.
Lebanon has not said whether it will seek assistance from the International Monetary Fund. In December, then-caretaker Prime Minister Saad Hariri met with IMF and World Bank officials to discuss technical aid in drawing up a rescue plan.
Under any possible IMF bailout plan, Lebanon would be required to agree to measures ranging from increasing taxes to fighting corruption. Among IMF recommendations to increase state revenues and slash budget deficit, Lebanon would be required to hike value-added tax, raise fuel excises and eliminate electricity subsidies, estimated at around $2 billion annually.
With the Lebanese pound having lost over 40 percent 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. Lebanon’s new government came under international pressure Thursday to proceed with implementing key economic reforms as a condition for extending urgently needed financial assistance to the protest-hit country.
The mounting pressure comes as Lebanon is grappling with a dire economic and financial crisis, the worst since the 1975-90 Civil War, that has shaken confidence in banks and raised concerns over its ability to repay one of the world’s highest levels of public debt.
Diab formed a 20-member Cabinet Tuesday, just over a month after his appointment as premier on Dec. 19. His government has been widely rejected by protesters and opposition politicians as “one-sided,” as it is only made up of ministers supported by Hezbollah, the Amal Movement, the Free Patriotic Movement and their allies. This has raised concerns about the government’s ability to drum up the international support needed to avert a much-feared economic collapse.
The International Support Group for Lebanon joined France, Britain and the European Union in calling for enacting reforms in Lebanon. The ISGL urged Diab’s government to adopt a policy statement with the “necessary substantial, credible and comprehensive policy package of measures and reforms that can address the demands of the Lebanese people.”
In a statement released Thursday night, the ISGL said Diab’s government’s “timely and decisive implementation will be essential to stopping and reversing the deepening crises facing the country and its citizens.“
The ISGL brings together the United Nations, the governments of China, France, Germany, Italy, Russia, the United Kingdom and the United States, along with the EU and the Arab League.
The statement recalled that Lebanon’s economy and its population, “in the absence of reform, remain reliant on external funding and are vulnerable to increased hardships.”
The 2020 budget should be passed immediately, the group said, adding that the “electricity reform plan, reforming state-owned enterprises and passing and implementing effective procurement laws” were all needed.
Once reform measures are implemented in Lebanon, the ISGL said it would support Lebanon and that this would start to rebuild confidence in the economy among Lebanese and the international community and “help facilitate sustained international support.”
As for the nationwide anti-government protests taking place since Oct. 17, the ISGL reaffirmed the need for “internal stability and the right to peaceful protest to be protected.”
The United Nations Special Coordinator for Lebanon Jan Kubis said after a meeting with Diab Friday that he felt “seriousness and positive signals” from the prime minister about implementing reforms.
Asked about his trust in the new government, Kubis told reporters after the meeting with Diab at the Grand Serail: “Let’s wait for the [policy] statement. But I heard good and positive messages during our talks on fighting corruption. This is very important.”
“The first step Lebanon must take is reforms, reforms and reforms, break the previous practices of corruption, and adopt transparency and confidence,” he added.
Meanwhile, a ministerial committee tasked with drafting the Cabinet’s policy statement held two meetings under Diab at the Grand Serail Friday.
Diab stressed the need for drawing up a road map for the government through the policy statement that “should avoid linguistic complications and contradictory interpretations.”
“People are waiting for us to act. Therefore, the [policy] statement must not contain empty promises or suggest to the Lebanese people that all is well,” Diab said, according to Information Minister Manal Abdel Samad Najd who spoke to reporters after the two meetings.
“We must adopt facts and realities in the [policy] statement and to commit only to what we can implement so that the policy statement will not be just ink on paper,” Diab said.
He called on ministers to study and outline the files of their ministries with transparency based on the “demands of the Lebanese and the protest movement.”
Declaring the government’s intention to restore internal and external confidence, Diab, according to Abdel Samad, said: “We are facing a test to gain internal and external confidence. The [policy] statement will be implemented this time. There is seriousness in work.”
According to the law, the committee still has 28 days left to finalize the policy statement, Abdel Samad said. But she added that ministers were working quickly to finish drafting the statement well before this period.
The policy statement is essential for the government to seek a vote of confidence from Parliament.
Headed by Diab, the committee, which includes the deputy prime minister and defense minister, the ministers of finance, foreign affairs, justice, economy, environment, information, youth and sports, telecoms, industry, social affairs and minister of state for administrative reform, will meet again Saturday.
Separately, Parliament will vote next week on the draft state 2020 budget that projects a deficit of 7 percent of GDP, the head of Parliament’s Finance and Budget Committee MP Ibrahim Kanaan said Friday - far larger than the 0.6 percent originally planned, as multiple crises batter the country’s finances.