Confusion Threatens International Trust In Lebanon's Government

 Lebanon’s Prime Minister Hassan Diab signs a request for assistance from the International Monetary Fund at the government palace in Beirut, Lebanon May 1, 2020. Dalati Nohra/Handout via REUTERS
Lebanon’s Prime Minister Hassan Diab signs a request for assistance from the International Monetary Fund at the government palace in Beirut, Lebanon May 1, 2020. Dalati Nohra/Handout via REUTERS
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Confusion Threatens International Trust In Lebanon's Government

 Lebanon’s Prime Minister Hassan Diab signs a request for assistance from the International Monetary Fund at the government palace in Beirut, Lebanon May 1, 2020. Dalati Nohra/Handout via REUTERS
Lebanon’s Prime Minister Hassan Diab signs a request for assistance from the International Monetary Fund at the government palace in Beirut, Lebanon May 1, 2020. Dalati Nohra/Handout via REUTERS

A dispute over the implementation of the government’s electricity rehabilitation plan has drawn local and international attention and criticism over the Cabinet’s “inability to respect its decisions.”

The government went back on an earlier decision to annex the Salaata power plant project to the second phase of the electricity rehabilitation program.

President Michel Aoun had asked the Cabinet Friday to reconsider a decision to postpone the building of a power plant in the village of Salaata on the northern coast. To diffuse tension with Aoun, Diab found an exit to reconsider his government’s decision, despite rejections from the Amal Movement and the Marada Movement’s ministers.

The plan is also opposed by other political forces such as the Mustaqbal movement, the Lebanese Forces, and the Progressive Socialist Party.

Parties against the plan said that building a third plant in Lebanon requires tens of millions of dollars by the time the country is suffering from a dire economic and financial crisis.

A minister, who had voted in favor of the decision before the government retracted it, stressed that Diab has “mismanaged his battle” against the head of the Free Patriotic Movement, MP Gebran Bassil.

Speaking on condition of anonymity, the minister told Asharq Al-Awsat that he was not aware of the reasons behind Diab’s decision, which came after his meeting with Aoun, before the Cabinet session that “politically harmed his government on the one hand, and caused him international and Arab embarrassment, on the other.”

A deputy also commented on the government’s move, saying: “The government’s performance is dominated by improvisation and confusion… which is hindering key financial, banking and administrative appointments.”

This would shake the government’s credibility before the International Monetary Fund (IMF), the deputy noted, especially as bold moves are required to implement the approved reform plans.



Dollar Resumes Upward Trend, Euro Hits Lowest since Nov 2022

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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Dollar Resumes Upward Trend, Euro Hits Lowest since Nov 2022

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The dollar hit new multi-month highs against the euro and the pound on Thursday, the first day of 2025 trading, as it built on last year's strong gains on expectations US interest rates will remain high relative to peers.

The euro fell to as low as $1.0314, its lowest since November 2022, down around 0.3% on the day. It is now down nearly 8% since its late September highs above $1.12, one major victim of the dollar's recent surge.

Traders anticipate deep interest rate cuts from the European Central Bank in 2025, with markets pricing in at least four 25 basis point cuts, while not being certain of even two such moves from the US Federal Reserve, Reuters reported.

The dollar was hitting milestones across the board and the pound was last down 0.65% at $1.2443, its lowest since April, with its fall accelerating after it broke through resistance around $1.2475.

"It's more of the same at the start of the new calendar year with the dollar continuing to extend its advances in anticipation of Trump putting in place friendly policies at the start of his term," said Lee Hardman, senior currency analyst at MUFG.

US President-elect Donald Trump's policies are widely expected to not only boost growth but also add to upward price pressure. That will lead to a Fed cautious about cutting rates too much further, in turn underpinning US Treasury yields and boost dollar demand.

A weaker growth outlook outside the US, conflict in the Middle East and the Russia-Ukraine war have also added to demand for the dollar.

The dollar also reversed an early loss on Thursday to climb against the Japanese yen, and was last up 0.17% at 157.26.

It reached a five-month high above 158 yen in late December, potentially putting pressure on the Bank of Japan, which is expected to raise interest rates early this year, but possibly not immediately.

"If dollar/yen were to break above 160 ahead of the next BOJ meeting, that could be a catalyst for the BOJ to hike in January rather than wait until March," said Hardman.

"Though for now markets are leaning towards March after the dovish comments from (governor Kazuo) Ueda at his last press conference."

Even those who are more cautious about sustained dollar strength think it could take a long time to play out.

"The dollar may be vulnerable – but only if the US data confound market expectations that the Fed doesn’t cut rates more than once in the first half of this year, and not by more than 50bp in the whole of 2025," said Kit Juckes chief FX strategist at Societe Generale in a note.

"There's a good chance of that happening, but it seems very unlikely that cracks in US growth will appear early in the year – hence my preference for taking any bearish dollar thoughts with me into hibernation until the weather improves."

China's yuan languished at 14-month lows as worries about the health of the world's second-biggest economy, the prospect of US import tariffs from the Trump administration and sliding local yields weighed on investor sentiment.

Elsewhere, the Swiss franc, another victim of the recent dollar strength, gave back early gains to last trade flat at 0.90755 per dollar.

The Australian and New Zealand dollars, however, managed to break away from two-year lows touched on Tuesday. The Aussie was 0.36% higher at $0.6215 having dropped 9% in 2024, its weakest yearly performance since 2018.

The kiwi rose 0.47% to $0.5614.