Slow Progress as Lebanon Awaits IMF Economic Deal

The International Monetary Fund (IMF) headquarters building is seen in Washington, US, April 8, 2019. REUTERS/Yuri Gripas/File Photo
The International Monetary Fund (IMF) headquarters building is seen in Washington, US, April 8, 2019. REUTERS/Yuri Gripas/File Photo
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Slow Progress as Lebanon Awaits IMF Economic Deal

The International Monetary Fund (IMF) headquarters building is seen in Washington, US, April 8, 2019. REUTERS/Yuri Gripas/File Photo
The International Monetary Fund (IMF) headquarters building is seen in Washington, US, April 8, 2019. REUTERS/Yuri Gripas/File Photo

Lebanon is mired in an economic crisis branded by the World Bank as one of the worst in modern times, but officials are yet to strike an international bailout deal.

The financial meltdown began in 2019, and Lebanon defaulted on its debt last year.

Politicians have failed to enact significant reforms to rescue the Mediterranean country, and many blame the ruling class and central bank policies for the crash.

What is delaying progress on talks with the International Monetary Fund (IMF) to strike a deal and unlock crucial donor funds?

- How bad is the crisis? -

Lebanon's GDP has plummeted from about $55 billion in 2018 to a projected $20.5 billion in 2021, a "brutal contraction" that the World Bank says "is usually associated with conflicts or wars".

Negotiations with the IMF opened in May 2020, but after two months they stalled amid arguments over the size of financial losses.

Talks resumed in September this year after the formation of a new government headed by Prime Minister Najib Mikati.

Lebanese officials have yet to submit a plan for negotiation.

But they have since agreed that financial sector losses amount to around $69 billion, according to Deputy Prime Minister Saade Chami, who is leading Lebanon's IMF negotiation team.

The Lebanese pound has lost more than 90 percent of its value in two years, and four out five Lebanese are living under the UN's poverty threshold.

Even though the official value of the pound still stands at 1,507 to the dollar, the central bank has adopted multiple exchange rates to try to combat its devaluation on the black market.

A unification of the different rates "would not be possible" without an IMF deal and political consensus, central bank governor Riad Salameh said this month, adding that $12-15 billion was needed to kickstart recovery.

- What's on the table? -

Lebanese officials met IMF delegates in early December to discuss "economic policies that will be an integral part of the funding program that Lebanon could receive," Chami told AFP.

Restructuring Lebanon's banking sector -- a longstanding demand of donors -- was among the topics discussed, he added.

"We need to prepare, in cooperation with the IMF, a comprehensive economic recovery plan that will be sent to the (IMF's) funding board for approval," Chami said.

The Lebanese government -- which has not met since October due to a political dispute over the fate of investigations into the August 2020 Beirut port blast -- must also sign off on a deal, Chami added.

He said Lebanon could see "concrete results" as soon as January, but warned that the government must "show it is committed to reforms" before any agreement is reached.

Lebanon's prime minister said Tuesday that the first official meeting with the IMF would take place on January 15.

The visiting IMF delegation will review the progress the government has made, and may return in early February to finalize a deal, Mikati added.

- To audit or not? -

A financial audit of the central bank is among the top demands of international donors, and is widely viewed as a precondition for an IMF agreement.

The Alvarez & Marsal (A&M) firm launched an audit in September 2020, but was forced to pull out two months later because the central bank failed to hand over necessary data.

In October this year, Lebanese President Michel Aoun said the company would resume its work, and it is due to submit its report to the government next month.

Former vice governor of the central bank, Nasser Saidi, suggested the IMF would want to examine the audit, but Chami said no demands had yet been made.

"We don't know if a forensic audit, or any audit, will be part of a potential IMF program," Chami said.

A potential IMF agreement will ultimately bring in other donors, such as the World Bank and Gulf Arab states, who may demand it as a precondition for support.

"We need to understand what is going on inside the central bank," Chami said. "There is a total lack of transparency."

For Saidi, a key question is the actual value of central bank reserves and the real value of financial sector losses.

"There seems to be no willingness to undertake a forensic audit," he said, but added that the "bottom line is the IMF will be looking –- before anything -- for promises of good governance."



Al-Rumayyan: PIF Investments in Local Content Exceed $157 Billion

Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)
Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)
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Al-Rumayyan: PIF Investments in Local Content Exceed $157 Billion

Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)
Yasir Al-Rumayyan speaks to the audience in the opening speech of the Public Investment Fund Private Sector Forum (Asharq Al-Awsat)

Yasir Al-Rumayyan, governor of Saudi Arabia’s Public Investment Fund (PIF), announced that spending by the sovereign fund’s programs, initiatives, and companies on local content reached 591 billion riyals ($157 billion) between 2020 and 2024.

He added that the fund’s private sector platform has created more than 190 investment opportunities worth over 40 billion riyals ($10 billion).

Speaking at the opening of the PIF Private Sector Forum on Monday in Riyadh, Al-Rumayyan said the fund is working closely with the private sector to deepen the impact of previous achievements and build an integrated economic system that drives sustainable growth through a comprehensive investment cycle methodology.

He described the forum as the largest platform of its kind for seizing partnership and collaboration opportunities with the private sector, highlighting the fund’s success in turning discussions into tangible projects.

Since 2023, the forum has attracted 25,000 participants from both public and private sectors and has witnessed the signing of over 140 agreements worth more than 15 billion riyals, he pointed out.

Al-Rumayyan emphasized that the meeting comes at a pivotal stage of the Kingdom’s economy, where competitiveness will reach higher levels, sectors and value chains will mature, and ambitions will be raised.

PIF Private Sector Forum aims to support the fund’s strategic initiative to engage the private sector, showcase commercial opportunities across PIF and its portfolio companies, highlight potential prospects for investors and suppliers, and enhance cooperation to strengthen the local economy.


Pakistan’s Finance Minister to Asharq Al-Awsat: We Draw Inspiration from Saudi Arabia

The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)
The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)
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Pakistan’s Finance Minister to Asharq Al-Awsat: We Draw Inspiration from Saudi Arabia

The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)
The Pakistani Finance Minister during his meeting with Saudi Minister of Economy and Planning Faisal Alibrahim on the sidelines of the AlUla Conference (SPA)

Pakistani Finance Minister Muhammad Aurangzeb discussed the future of his country, which has frequently experienced a boom-and-bust cycle, saying Pakistan has relied on International Monetary Fund (IMF) programs due to the absence of structural reforms.

In an interview with Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Aurangzeb acknowledged that Pakistan has relied on IMF programs 24 times not as a coincidence, but rather as a result of the absence of structural reforms and follow-up.

He stressed the government has decided to "double its efforts" to stay on the reform path, no matter the challenges, affirming that Islamabad not only has a reform roadmap, but also draws inspiration from "Saudi Vision 2030" as a unique model of discipline and turning plans into reality.

Revolution of Numbers

Aurangzeb reviewed the dramatic transformation in macroeconomic indicators. After foreign exchange reserves covered only two weeks of imports, current policies have succeeded in raising them to two and a half months.

He also pointed out to the government's success in curbing inflation, which has fallen from a peak of 38 percent to 10.5 percent, while reducing the fiscal deficit to 5 percent after being around 8 percent.

Aurangzeb commented on the "financial stability" principle put forward by his Saudi counterpart, Mohammed Aljadaan, considering it the cornerstone that enabled Pakistan to regain its lost fiscal space.

He explained that the success in achieving primary surpluses and reducing the deficit was not merely academic figures, but rather transformed into solid "financial buffers" that saved the country.

The minister cited the vast difference in dealing with disasters. While Islamabad had to launch an urgent international appeal for assistance during the 2022 floods, the "fiscal space" and buffers it recently built enabled it to deal with wider climate disasters by relying on its own resources, without having to search "haphazardly" for urgent external aid, proving that macroeconomic stability is the first shield to protect economic sovereignty.

Privatization and Breaking the Stalemate of State-Owned Enterprises

Aurangzeb affirmed that the Pakistani Prime Minister adopts a clear vision that "the private sector is what leads the state."

He revealed the handover of 24 government institutions to the privatization committee, noting that the successful privatization of Pakistan International Airlines in December provided a "momentum" for the privatization of other firms.

Aurangzeb also revealed radical reforms in the tax system to raise it from 10 percent to 12 percent of GDP, with the adoption of a customs tariff system that reduces local protection to make Pakistani industry more competitive globally, in parallel with reducing the size of the federal government.

Partnership with Riyadh

As for the relationship with Saudi Arabia, Aurangzeb outlined the features of a historic transformation, stressing that Pakistan wants to move from "aid and loans" to "trade and investment."

He expressed his great admiration for "Vision 2030," not only as an ambition, but as a model that achieved its targets ahead of schedule.

He revealed a formal Pakistani request to benefit from Saudi "technical knowledge and administrative expertise" in implementing economic transformations, stressing that his country's need for this executive discipline and the Kingdom's ability to manage major transformations is no less important than the need for direct financing, to ensure the building of a resilient economy led by exports, not debts.


Oil Drops 1% as US, Iran Pledge to Continue Talks

The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)
The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)
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Oil Drops 1% as US, Iran Pledge to Continue Talks

The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)
The sun rises behind the Tishrin oil field in the eastern Hasakah countryside, northeastern Syria (AP)

Oil prices fell 1% on Monday as immediate fears of a conflict in the Middle East eased after the US and Iran pledged to continue talks about Tehran's nuclear program over the weekend, calming investors anxious about supply disruptions.

Brent crude futures fell 67 cents, or 1%, to $67.38 a barrel on Monday by 0444 GMT, while US West Texas Intermediate crude was at $62.94 a barrel, down 61 cents, or 1%.

"With more talks on the horizon the immediate ‌fear of supply disruptions ‌in the Middle East has eased ‌quite ⁠a bit," IG ‌market analyst Tony Sycamore said.

Iran and the US pledged to continue the indirect nuclear talks following what both sides described as positive discussions on Friday in Oman despite differences. That allayed fears that failure to reach a deal might nudge the Middle East closer to war, as the US has positioned more military forces in the area.

Investors are also worried about possible disruptions to supply ⁠from Iran and other regional producers as exports equal to about a fifth of the world's ‌total oil consumption pass through the Strait of ‍Hormuz between Oman and Iran.

Both ‍benchmarks fell more than 2% last week on the easing tensions, their ‍first decline in seven weeks.

However, Iran's foreign minister said on Saturday Tehran will strike US bases in the Middle East if it is attacked by US forces, showing the threat of conflict is still alive.

"Volatility remains elevated as conflicting rhetoric persists. Any negative headlines could quickly reignite risk premiums in oil prices this week," said Priyanka Sachdeva, senior market analyst at ⁠Phillip Nova.

Investors are also continuing to grapple with efforts to curb Russian income from its oil exports for its war in Ukraine. The European Commission on Friday proposed a sweeping ban on any services that support Russia's seaborne crude oil exports.

Refiners in India, once the biggest buyer of Russia's seaborne crude, are avoiding purchases for delivery in April and are expected to stay away from such trades for longer, refining and trade sources said, which could help New Delhi seal a trade pact with Washington.

"Oil markets will remain sensitive to how broadly this pivot away from Russian crude unfolds, whether ‌India’s reduced purchases persist beyond April, and how quickly alternative flows can be brought online," Sachdeva said.