Lebanon needs the help of the International Monetary Fund to draft a rescue plan and decide whether to repay its $1.2 billion Eurobond maturing next month, a local newspaper cited a veteran politician and member of the ruling coalition as saying.
With the country facing its worst financial crisis in decades after months of protests, parliament Speaker Nabih Berri said Lebanon should form a task force comprising the premier, ministers of economy and finance as well as legal and financial experts, Annahar newspaper reported. The committee would begin work in parallel to making a request to the IMF.
“We need to send a message to the world, perhaps to the Americans in particular -- given that they’re the most influential and active factor in the International Monetary Fund -- stipulating that Lebanon needs the fund’s technical help for a rescue plan,” the newspaper cited Berri saying.
The speaker made it clear, though, that Lebanon wouldn’t seek an IMF package as happened in Argentina in 2018 because the Lebanese public couldn’t accept the conditions that the fund would likely impose. Politicians have said that a rescue package from the lender would require Lebanon to float its pegged currency and raise taxes.
Former Prime Minister Saad Hariri -- in his capacity as caretaker head of government -- had asked both the World Bank and the IMF for help in drafting a plan to address the country’s economic and financial crisis. Tightening liquidity has forced the central bank and local lenders to restrict the movement of dollars, banning most transfers abroad. The measures lead to the emergence of a black market rate above the decades-old peg.
Lebanese politicians are divided over repaying about $6 billion of Eurobond principal and coupon payments due this year. Some think the government should engage with bondholders to restructure its debt and save what’s left of its reserves to support imports of essential goods. Others, including Prime Minister Hassan Diab, argue that the country should pay and preserve its reputation in the international market. Lebanon has never defaulted on its debt.
The speaker’s comments were published as protesters gathered near parliament in downtown Beirut to demonstrate against a vote of confidence in Diab’s new government.
It eventually won the legislature’s backing, securing the approval of 63 lawmakers out of 84 present. Only one abstained from voting. The demonstrators are demanding the complete removal of the country’s elite from office and an end to corruption.
As the session opened, Diab said his government would draft an “emergency plan” before the end of the month to address looming repayments and challenges facing the country. He said the proposals will be accompanied by a rescue package that would require an audit of the central bank’s liabilities and assets.
Diab, a former education minister and an academic, said his plan sees lower interest rates on Treasury bills, as well as on the certificates of deposits that local lenders hold at the central bank. The government will also seek to better organize measures taken by local lenders.
“Regaining stability in the banking sector requires a series of measures, including boosting banks’ capital by injecting cash liquidity, banks using their reserves, dealing with defaulted loans, restructuring the sector and banks selling their investments abroad,” Diab said.
Scuffles between protesters and security forces turned violent outside parliament.
At least 218 people were injured, 28 of whom needed hospital treatment. Protesters began gathering in the capital in the early morning and local reports said some lawmakers spent the night in their offices to guarantee their arrival and secure a quorum.
Security forces used tear gas and water canons against protesters who in turn threw rocks and eggs. One lawmaker was hospitalized after protesters pelted his vehicle, Berri said.
Lawmakers took the podium to discuss the country’s financial and economic plight, with some even proposing a revision of the pegged exchange rate.
One of them, Michel Daher, said he wouldn’t vote against the government as long as it agreed to pay the March Eurobond. “After becoming the Switzerland of the Middle East, we don’t want to become the Venezuela of the Middle East,” he said.