Lebanon’s Economy Between Scenarios of Argentina, Venezuela

A worker cleans receipts from an ATM machine outside a closed Blom bank branch in the southern city of Sidon, Lebanon November 12, 2019. REUTERS/Ali Hashisho
A worker cleans receipts from an ATM machine outside a closed Blom bank branch in the southern city of Sidon, Lebanon November 12, 2019. REUTERS/Ali Hashisho
TT
20

Lebanon’s Economy Between Scenarios of Argentina, Venezuela

A worker cleans receipts from an ATM machine outside a closed Blom bank branch in the southern city of Sidon, Lebanon November 12, 2019. REUTERS/Ali Hashisho
A worker cleans receipts from an ATM machine outside a closed Blom bank branch in the southern city of Sidon, Lebanon November 12, 2019. REUTERS/Ali Hashisho

The complex Lebanese crisis opened the door for comparison with previous crises that took place in other countries, in search of common points for which international entities found effective solutions, with the hope of facilitating the process of soliciting rescue programs.

Bank of America’s Merrill Lynch prepared a study last year about the debt restructuring imposed by the International Monetary Fund (IMF), and its impact on the banking sector.

The study considered that Lebanon was close to countries such as Mozambique, Cyprus, and Barbados, which are debt-ridden states and have a high percentage of public finance deficits relative to GDP.

Many experts, however, consider that Lebanon may be closer to Argentina, while others describe it as “another Greece”.

In this context, Dr. Pierre Khoury, economist, says: “There is a fundamental error when comparing Lebanon’s experience with Argentina, as the latter has entered into structural adjustment programs with the IMF, which are programs that are based on an essential change in the economic and social structure, redistribution of income and factors of production.”

According to Khoury, Argentina has made an explicit political decision to follow the policy of the IMF, based on political harmony and leadership, which has not seen sharp differences over the cooperation with the Fund.

“In the past two years, the IMF secured massive financing for Argentina in two phases, the first reaching USD 50 billion, and then an additional USD 7 billion was added to it,” he explained.

“In Lebanon, there is no unified view of how to get out of the economic crisis,” Khoury said.

“Politically, there is a major rift between political parties on cooperation with the IMF through a specific program.”

Khoury noted that the IMF only “gives money based on agreement on a reform program that restructures the economy towards further liberalizing the sector and opening it to the outside, and creating an economic environment that encourages the flow of capital, by signing a clear-cut agreement, which includes executive steps linked to specific timetables.”

Based on these points, Khoury believes that Lebanon is more inclined in its crisis towards the Venezuelan model – the oil-rich country. This advantage is still only a probability in Lebanon, at the present time.

Khoury added that the economic, political and financial blockade led to the collapse of the internal economy of Venezuela, and the disruption of the international payment system, in addition to the crisis mismanagement of President Nicolas Maduro’s government.

He noted that Lebanon had common points with Venezuela, whether the set of mistakes in the public administration of the state, the lack of a long-term view, the dangers of geopolitical conflicts and their potential impact on the economic activity and the lack of international flows, as well as corruption.

“Lebanon is witnessing a sharp division in politics, especially with regards to the IMF assistance... All these matters make Lebanon close to the Venezuelan model,” Khoury underlined.



Lebanon Receives $250 million World Bank Loan to Ease Power Problems

A view shows Lebanon's Central Bank building in Beirut, Lebanon April 4, 2025. REUTERS/Mohamed Azakir
A view shows Lebanon's Central Bank building in Beirut, Lebanon April 4, 2025. REUTERS/Mohamed Azakir
TT
20

Lebanon Receives $250 million World Bank Loan to Ease Power Problems

A view shows Lebanon's Central Bank building in Beirut, Lebanon April 4, 2025. REUTERS/Mohamed Azakir
A view shows Lebanon's Central Bank building in Beirut, Lebanon April 4, 2025. REUTERS/Mohamed Azakir

The World Bank has granted Lebanon a $250 million loan aimed at helping alleviate persistent power cuts worsened by last year's war between Israel and Hezbollah, the country's finance ministry said on Thursday.

Even before the conflict, Lebanon had for years been struggling with a severe shortage of imported fuel and poor infrastructure.

Following the conflict, however, the World Bank said it would need around $11 billion for reconstruction and recovery, Reuters reported.

The fighting between the Iran-backed group and Israel ended for the most part in November through a brittle ceasefire brokered by the United States, though the two sides accuse each other of failing to fully implement the deal.

Lebanon had said it received preliminary approval to increase a World Bank reconstruction loan to $400 million from $250 million. The loan is part of a $1 billion reconstruction program, with the remainder of the financing to come from international aid.