IMF Hopes Lebanon Approves State Budget as Soon as Possible

Lebanese Finance Minister Ali Hassan Khalil. (Reuters)
Lebanese Finance Minister Ali Hassan Khalil. (Reuters)
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IMF Hopes Lebanon Approves State Budget as Soon as Possible

Lebanese Finance Minister Ali Hassan Khalil. (Reuters)
Lebanese Finance Minister Ali Hassan Khalil. (Reuters)

An International Monetary Fund (IMF) mission to Lebanon hoped on Monday that parliament would approve the draft 2019 state budget as soon as possible

The head of the IMF mission, Chris Jarvis, hoped “parliament would as soon as possible approve the budget in which work happened to reduce the deficit to 7.6% (of GDP), which will help release funds that Lebanon needs from the Cedre conference”, said the finance ministry in a statement.

Donor states and institutions pledged some $11 billion in financing to Lebanon at the Cedre conference in Paris last year, conditional on the country undertaking long-delayed reforms.

Finance Minister Ali Hassan Khalil said that it was important that Beirut send a “clear message of seriousness” in the coming days by approving the budget.

Approved by cabinet last month, the budget is being debated in parliament and aims to narrow the projected deficit to 7.6% of GDP from 11.5% last year.

It is seen as a critical step toward warding off a crisis which top leaders have warned is bearing down on Lebanon unless it carries out reforms. Lebanon’s public debt burden, equivalent to about 150% of GDP, is one of the heaviest in the world.

The IMF mission had arrived in Lebanon to prepare an Article IV report on the financial and monetary situation in the country, he told Reuters.

“The most important thing in the coming days is that we give a clear message of seriousness in completing the budget and approving it and that the 2020 budget comes to complete the steps proposed for this year,” he said.

He said the IMF report should be complete by mid-July, describing it as a “fundamental juncture with a great effect on assessing the situation and its stability, and Lebanon’s rating by the concerned institutions”.

Khalil said international institutions had welcomed measures set out in the draft budget “but in the discussion there is always fear about the extent of the Lebanese government’s commitment to the measures approved by cabinet”.

The draft budget includes a cut in public debt servicing through the issuance of low interest rate treasury bonds to the value of 11 trillion Lebanese pounds ($7.3 billion) in coordination with the Lebanese banking sector, the finance minister has said.

Khalil also said on Monday that all parties remained committed to the agreement, implementation of which was expected to begin.

“This matter is consensual with mutual understanding and the main element of it is Banque Du Liban,” he said, in reference to the central bank.



Oil Prices Rise as Iran Suspends Cooperation with UN Nuclear Watchdog

An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS
An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS
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Oil Prices Rise as Iran Suspends Cooperation with UN Nuclear Watchdog

An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS
An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS

Oil futures edged up on Wednesday as Iran suspended cooperation with the UN nuclear watchdog and markets weighed expectations of more supply from major producers next month, while the US dollar softened further. Brent crude was up 55 cents, or 0.8%, to $67.66 a barrel at 1301 GMT, while US West Texas Intermediate crude rose 58 cents, or nearly 0.9%, to $66.03 a barrel.

Brent has traded between a high of $69.05 a barrel and low of $66.34 since June 25, as concerns of supply disruptions in the Middle East have ebbed following a ceasefire between Iran and Israel. Iran enacted a law on Wednesday that stipulates any future inspection of its nuclear sites by the International Atomic Energy Agency needs approval by Tehran's Supreme National Security Council. The country has accused the agency of siding with Western countries and providing a justification for Israel's air strikes, according to Reuters.

"The market is pricing in some geopolitical risk premium from Iran's move on the IAEA," said Giovanni Staunovo, a commodity analyst at UBS. "But this is about sentiment, there are no disruptions to oil." Planned supply increases by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, appear already priced in by investors and are unlikely to catch markets off-guard again imminently, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova. Four OPEC+ sources told Reuters last week the group plans to raise output by 411,000 barrels per day next month when it meets on July 6, a similar amount to the hikes agreed for May, June and July. "We are all talking about additional supply coming to the market, but the supply has not really hit the market," UBS' Staunovo said. "Probably because it's being consumed domestically."

Overall OPEC+ exports are relatively flat to slightly down since March, Staunovo said. He expects this trend to persist over the summer as hot weather drives higher energy demand. The greenback continued to weaken, falling to a 3-1/2-year low against its major peers on Wednesday. A weaker dollar tends to support oil prices, as it can boost demand for buyers paying in other currencies.

The release of the key US monthly employment report on Thursday will shape expectations around the depth and timing of interest rate cuts by the Federal Reserve in the second half of this year, said Tony Sycamore, an analyst at IG.

Lower interest rates could spur economic activity, which would in turn boost oil demand. Official US oil stockpile data from the Energy Information Administration is due to be released at 10:30 a.m. EDT (1430 GMT) on Wednesday. American Petroleum Institute data late on Tuesday showed US crude oil inventories rose by 680,000 barrels in the past week at a time when stockpiles are typically drawn down amid summer demand, sources said.