IMF: Lebanon is in 'Very Dangerous Situation'

Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP
Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP
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IMF: Lebanon is in 'Very Dangerous Situation'

Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP
Ernesto Rigo, the head of an International Monetary Fund mission to Lebanon, speaks during a press conference in Beirut, Lebanon, Thursday, March 23, 2023. AP

The International Monetary Fund warned on Thursday that Lebanon was in a very dangerous situation a year after it committed to reforms it has failed to implement and said the government must stop borrowing from the central bank.

IMF mission chief Ernesto Rigo told a news conference in Beirut that the authorities should accelerate the implementation of conditions set for a $3 billion bailout.

"One would have expected more in terms of implementation and approval of legislation" related to reforms, he said, noting "very slow" progress. "Lebanon is in a very dangerous situation," he added, in unusually frank remarks.

Lebanon signed a staff-level agreement with the IMF nearly one year ago but has not met the conditions to secure a full program, which is seen as crucial for its recovery from one of the world's worst financial crises.

Without implementing rapid reforms, Lebanon "will be mired in a never-ending crisis," the IMF warned in a written statement after Rigo's remarks.

The economy has been crippled by the collapse of the Lebanese currency, which has lost some 98% of its value against the US dollar since 2019, triggering triple-digit inflation, spreading poverty and a wave of emigration.

The crisis erupted after decades of profligate spending and corruption among the ruling elites, some of whom led banks that lent heavily to the state.

The government estimates losses in the financial system total more than $70 billion, the majority of which were accrued at the central bank.

"No more borrowing from the central bank," Reuters quoted Rigo as saying. "Over the years, the government has been borrowing from the central bank. Not just in the past (but also) the last few months, which is something we have recommended should stop."

The IMF has called for financial sector losses to be distributed in a way that preserves the rights of small depositors and limits recourse to state assets, though powerful politicians and banks have pushed back, delaying the recovery.

"Suffice it to say that the loss is so large that there will unfortunately have to be a distribution between the government, the banks and depositors," Rigo added.

Still, he said that the IMF would "never walk away" from helping a member country and there was no deadline for Lebanon to implement the reforms.



Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
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Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)

As Saudi companies start reporting their Q2 financial results, experts are optimistic about the transport and logistics sector. They expect a 10% annual growth, with total net profits reaching around SAR 900 million ($240 million), driven by tourism and an economic corridor project.

In Q1, the seven listed transport and logistics companies in Saudi Arabia showed positive results, with combined profits increasing by 5.8% to SAR 818.7 million ($218 million) compared to the previous year.

Four companies reported profit growth, while three saw declines, including two with losses, according to Arbah Capital.

Al Rajhi Capital projects significant gains for Q2 compared to last year: Lumi Rental’s profits are expected to rise by 31% to SAR 65 million, SAL’s by 76% to SAR 192 million, and Theeb’s by 23% to SAR 37 million.

On the other hand, Aljazira Capital predicts a 13% decrease in Lumi Rental’s net profit to SAR 43 million, despite a 44% rise in revenue. This is due to higher operational costs post-IPO.

SAL’s annual profit is expected to grow by 76% to SAR 191.6 million, driven by a 29% increase in revenue and higher profit margins.

Aljazira Capital also expects a 2.8% drop in the sector’s net profit from Q1 due to lower profits for SAL and Seera, caused by reduced revenue and profit margins.

Mohammad Al Farraj, Head of Asset Management at Arbah Capital, told Asharq Al-Awsat that the sector’s continued profit growth is supported by seasonal factors like summer travel and higher demand for transport services.

He predicts Q2 profits will reach around SAR 900 million ($240 million), up 10% from Q1.

Al Farraj highlighted that the India-Middle East-Europe Economic Corridor (IMEC), linking India with the GCC and Europe, is expected to boost sector growth by improving trade and transport connections.

However, he warned that companies may still face challenges, including rising costs and workforce shortages.