Lebanon

The International Monetary Fund remains in discussions with Lebanon about possible financing arrangements, an IMF spokesman said on Thursday, adding that it was premature to discuss the scope of any potential program, Reuters reported. Spokesman Gerry Rice declined to give any details on reforms the Fund would require before it would authorize a program, but said the Lebanese government needed to implement comprehensive, equitable reforms in many areas. He said Lebanon also needed to reach a common understanding about the source and size of the financial losses it faces.

Lebanon’s tax revenues dropped 12.5% during the first quarter of 2020 compared to a year earlier, ministry of finance data showed on Thursday, as a bruising financial crisis took its toll, Reuters reported. Lebanon has seen its currency plunge in value and unemployment soar since anti-government protests erupted last October. It defaulted on its sovereign debt before entering talks with the International Monetary Fund last month. The finance ministry data is the first to capture a full quarter since the protests started.

Emerging market investors are no strangers to sovereign debt crises, but few have been as perilous as the one facing Lebanon given a toxic combination of financial and political weaknesses and no obvious economic platform on which to build a recovery, Reuters reported. Since defaulting for the first time on its foreign currency debt in March, Lebanon has formed a rescue plan and started negotiations with the International Monetary Fund on $10 billion of aid, both moves that would normally be read as positive for a country mired in debt.

Lebanese Prime Minister Hassan Diab blamed “criminal” currency manipulation for the unraveling of the country’s decades-old peg as he touted his cabinet’s achievements despite an unprecedented financial crisis, Bloomberg News reported. Flanked by his entire cabinet during a televised speech on Thursday, Diab criticized what he said were years of neglect and mismanagement on the part of the state, saying his own government -- in place since January -- was on the path to restoring confidence in Lebanon.

Lebanese banks are urging the government to sell state assets and defer maturities to avoid defaulting on its domestic debt and driving the country’s finances into an even deeper crisis, Bloomberg News reported. The Association of Banks in Lebanon made the recommendations in a response to the economic recovery plan the government is discussing with the International Monetary Fund after seeking $10 billion in assistance.

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, Reuters reported. 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.

Lebanon’s financial prosecutor ordered the detention of a director at Banque Du Liban for alleged currency manipulation, the first such move against a central bank that’s been under heavy scrutiny since the start of the country’s financial crisis, Bloomberg News reported. Prosecutor Ali Ibrahim said Mazen Hamdan, director of the cash operations department at the central bank, bought dollars from exchange bureaus and weakened the pound on the black market, the state-run National News Agency reported.

Only a handful of Lebanese lenders are expected to emerge from an economic rescue plan that many banks, who are among the government’s biggest creditors, oppose because it would wipe out $20.6 billion in shareholder capital, Reuters reported. Lebanon is trying to enlist the International Monetary Fund’s help and restructure around $90 billion in debt to end an economic crisis which has included a sovereign default, a currency crash and widespread public protests.

Lebanese banks are working on a national financial rescue plan that would preserve some of their capital rather than writing it all off as outlined in a government programme, the banking association head said on Tuesday, Reuters reported. The Association of Banks in Lebanon (ABL) has criticised the plan approved by the government last week, saying it would “further destroy confidence” in the heavily-indebted country which is facing economic and financial meltdown.

After dithering and division, Lebanon’s government has concluded the only way it can refloat its sinking economy is by going to the IMF, the Financial Times reported in a commentary. That would be just in time. While it is a shopworn adage that countries cannot go bankrupt, Lebanon palpably has.