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Lebanon Seeks to Change Tack in Talks with IMF

Lebanon Seeks to Change Tack in Talks with IMF

Tuesday, 28 September, 2021 - 08:00
President Michel Aoun chaired the financial meeting at the Baabda Palace on Monday. (Photo: Lebanese presidency)

The Lebanese authorities are sending signals to the International Monetary Fund about serious intentions to change its attitude in before a new round of negotiations.

In remarks to Asharq Al-Awsat, a finance official told Asharq Al-Awsat that the first government meeting this week “was closely monitored by foreign parties in anticipation of practical decisions that would consolidate the declared intentions” to move forward with the discussions with the IMF.

During the economic and financial meeting at the Presidential Palace chaired by President Michel Aoun on Monday, in the presence of Prime Minister Najib Mikati, the two sides focused on the requirements for the talks with the IMF, including the formation of the negotiation team.

Informed sources said that Mikati “will assume direct political supervision of the talks, given its extreme sensitivity and because the 17 official rounds of negotiations did not achieve any significant progress under the previous government.”

The new path, according to the finance official, requires the new government to commit to former pledges made at four international conferences, during which foreign countries and institutions pledged to provide Lebanon with grants, aid and loans worth billions of dollars.

The official noted that the IMF has reiterated that adherence to the reform agenda would pave the way for the release of billions of dollars of funds to help the Lebanese people.

This is the moment when Lebanese policymakers must take decisive action to guarantee assistance from the Fund and the international donors, he said.

A working paper submitted by the Director-General of the Fund, Kristalina Georgieva, less than two months ago, to the Paris International Conference to support Beirut and the Lebanese people, set the priorities of the Lebanese government during the negotiations.

“The solvency of public resources and the solidity of the financial system must be restored, accompanied by a warning that if the public debt is not sustainable, the current and future generations of the Lebanese will carry the burden,” the official said.

This is what makes the Fund demand the sustainability of debts as one of the conditions for lending, which highlights the importance of expediting parallel negotiations with local and external creditors.

According to the working paper, temporary safeguards should be put in place to avoid the continuation of capital outflows that could increase the vulnerability of the financial system during the period of consolidation of the required reforms.

This includes adopting the capital control bill in the banking system and abolishing the existing multiple exchange rate system, which helps protect international reserves in Lebanon while curbing profiteering and corruption.

There is also a need for explicit steps to reduce long-term squandering in many public institutions, in parallel with a greater degree of predictability, transparency, accountability and a comprehensive audit of the key institutions, including the Central Bank, as well as the establishment of an expanded social safety net in order to protect Lebanon's most vulnerable groups.

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