The president of the Association of Banks in Lebanon, Salim Sfeir, refuses to talk about the possibility of a financial collapse in the country, just as he rejects the idea of alternatives to the measures that should be taken to avoid this collapse.
Actions are inevitable, and everyone knows the roadmap to stop the “bleeding” in public finances, he stressed.
He ruled out the presence of a dollar crisis in the Lebanese market, but emphasized “a crisis of confidence” resulting from fear that is aggravated by statements made by officials.
Sfeir also said that the decision taken by the governor of Banque du Liban (BDL) to secure liquidity for basic materials would be an “aspirin pill” that would last a few months, if the public finances were not solved through a radical remedy.
The equation to save the financial situation is clear to Lebanese banks, according to Sfeir. They don’t need to submit proposals to state officials.
“Those know the decisions to be made; the only thing they have to do is to make the decision, because not taking it today means that we will be forced later to take it without the positive effects,” he remarked.
The president of the Association of Banks went on to say: “Lebanon's great hope is the 2020 budget, which will define the next phase.”
“This budget must be miraculous, and needs scissors to cut useless expenses, while greater attention should be focused on achieving the required balance,” he underlined.
Lebanon’s 2019 budget deficit amounted to $6.8 billion. Sfeir noted that the budget crisis was due to three main causes: The first is the electricity problem, as the country pays $2.65 billion annually to subsidize power.
He affirmed that cutting such subsidies would ease about one-third of public debt, especially since those were not feasible and did not lead to a sufficient supply of power.
The solution to this crisis comes either by cutting off the subsidies, “even if we have to sit in the dark to save the country,” or by privatizing and handing over the sector to companies with expertise, Sfeir said.
The second solution, according to Sfeir, is to increase revenues through specific taxes that affect first the pack of tobacco, which “should not remain at its current price” that is way cheaper than in any other developed country.
The third approach to the solution is in public sector expenditures. The state annually pays about $6.4 billion in salaries to employees. While stressing that staff cannot be harmed, Sfeir noted that the issue could be addressed in the medium and long terms and by immediately ending public sector employment.