Minister of Finance Ghazi Wazni said that the Lebanese government’s success in achieving the required reforms was the key to address the financial and economic crisis, underlining the need for support from the various political forces in this regard.
In an interview with Asharq Al-Awsat, Wazni noted that the financial rescue plan would give the government credibility in dealing with international institutions and open the way for the implementation of the 2018 CEDRE conference pledges.
“The plan is mainly aimed at the international community, especially for creditors and the International Monetary Fund,” he said.
He explained: “Last March, the government decided to suspend the payment of international debt bonds (Eurobonds), which required us to prepare a comprehensive financial plan that would serve as a platform for negotiating with creditors, and to submit it to the IMF, which responded to the government’s request for technical assistance at the time.”
Wazni emphasized that in view of state’s modest capabilities, the recovery process would be impossible to achieve without external support that is closely bound to actual and real reforms.
“We have reached the final version of the plan following discussions we had with the Economic and Social Council and the observations that we have received from professional unions and economic and financial experts, most of whom represent the various political parties,” he noted.
The minister added that the government’s paper was an “economic, financial and social vision that can be developed and modified and modernized after presenting it to the relevant local and external groups, including political and economic authorities.”
He said that Arab and foreign ambassadors have welcomed the plan during their recent meetings with Prime Minister Hassan Diab.
“Most importantly, we received a positive impression from the IMF, especially during the first official meetings that we launched last Monday,” he remarked.
Asked about the reservations expressed by the Central Bank (BDL) and the strong rejection of the plan by the Association of Lebanese Banks, Wazni replied: “It’s normal. The seven axes included in the plan represent the economic, financial and social vision. The main axis that concerns the financial sector will be discussed in the next stage with the BDL and the banking sector.”
The minister explained that Lebanon applied for about $10 billion in installments over a period of three to four years. In addition, it requested emergency financial assistance as part of the Fund’s initiative to counter the repercussions of COVID-19.
“Based on Lebanon’s quota, we may get about $900 million dollars, and await the answer within ten days,” he added.
On whether the IMF would set difficult conditions that Lebanon would fail to meet, Wazni emphasized that the recovery plan drafted by the government “gives it credibility in dealing with international institutions.”
“The confidence factor is very important for the country at the current stage. When the government prepared its plan, it took into consideration the internal Lebanese situation at the economic, financial, social, living and political levels, as well as the approaches that the IMF usually follows. Thus, the program is adjustable according to the course of negotiations with the Fund,” he stated.
Asked about the government’s strategy with regards to the public sector, the electricity file, the local currency exchange rate and other important matters raised by the IMF, Wazni stressed that despite diverging views, negotiations with the organization would continue until an agreement is reached.
“We will certainly face obstacles and disagreements, with the issue of privatization and fixing the exchange rate. We have discussed all these matters with them and will continue the negotiations in the next stage,” he remarked.
The minister went on to say: “If we have internal political support and backing by the international community, our negotiating position will be strengthened. Reforms are also a factor of strength, because the international community expresses its willingness to support, but requires the initiation of reforms.”
Wazni revealed that French Finance Minister Bruno Le Maire has emphasized, during a phone call, three matters of utmost importance: The endorsement of the comprehensive financial plan; support by France and the international community; and reforms as an important and essential condition.
“‘Then, France will support you in every sense of the word,’” he quoted Le Maire as saying.
Commenting on the deteriorating economic and financial conditions, Wazni emphasized that the government would continue to pay the salaries of public sector employees and seek to provide all necessary medical needs.
“The World Bank provided between 450 and 500 million dollars to support the fight against poverty... At the same time, the government provided cash assistance to around 200,000 families in need,” he noted.
Wazni also said that the government was trying to focus on supporting the agricultural and industrial productive sectors, especially institutions that incurred severe losses due to the spread of the novel coronavirus.
“We turned to the IMF to secure more support to confront the outbreak and the financing of SMEs,” he added.
The finance minister said that based on the figures provided by the BDL, there are around $21 billion in foreign currency reserves.
“The BDL finances imports of gasoline, medicine, flour and raw materials for industry, in addition to wheat because of the health emergency. In general, the available reserves are sufficient to finance basic commodities for the two current and next years,” he underlined.
Wazni noted that his relation with the BDL was based on trust.
“We have questions about the figures released by the central bank and the issue of transfers in the recent period. Other than that, the government’s relationship with the BDL is normal,” he remarked.
The government has appointed three companies to audit the BDL’s budget within the framework of restructuring the financial sector, Wazni revealed.
He stressed that based on the proposed plan, the current exchange rate should be maintained at LBP 1,515; otherwise commodity prices would soar.
“In the next stage, we will turn to the policy of floating the exchange rate, meaning the gradual liberalization when we have defense resources that we are looking to acquire after agreeing with the IMF, and with the return of the flow of remittances from abroad and the implementation of the CEDRE pledges,” Wazni emphasized.
The minister concluded by calling on brotherly countries and Arab and Islamic investment funds to study the rescue plan positively and help Lebanon recover from its crisis.