ECONOMICS & POLICY
as caretaker government, and efforts to permit the formation of a Haririled government, by the time of this writing, did not appear to reach any conclusion. Without decision-making, Lebanon is not able to propose an effective economic roadmap and implement reforms, as takeover governments only tackle everyday business. The formation of a government would allow launching tenders to build power plants, reforming procurement laws and engaging in a BDL audit, all of which are part of the French initiative but also of any reform package that would be approved by the IMF. Another example of immediate measures to be taken is the need to liberalize the rate of the Lebanese pound, which has not even been mentioned by the French initiative but is appearing more and more as an economic necessity to avoid a depletion of BDL reserves (due to said reserves being used for subsidies) and to allow Lebanon to minimize its trade balance deficit.
The French initiative recommendations could very well be applied by a Lebanese government, but under current political governance, appears increasingly difficult. Meanwhile, with political deadlocks, it seems reforms will have to wait. According to Hayek, the “French” initiative could be pursued without the French, but this could not be done anytime soon due to what he sees as a lack of parliamentary initiative, “If we get 20 new members of Parliament from the civil society next elections, maybe we can change the dialogue towards implementing effective reforms.”
The economic solutions to Lebanon’s crisis do not seem to require as much foreign intervention as they do national willingness
DESPERATELY
SEEKING GOVERNANCE
The French initiative seems to have hit a dead end.The main hurdles in implementing needed reforms are primarily political. For example, a full audit of the BDL would require a law to be passed in parliament due to banking secrecy requirements (though it has lately been subject to debate regarding public entities’ accounts according to Caretaker Justice Minister Marie-Claude Najm). In addition, procurement reforms would need a law in parliament, as they do not follow international standards, according to Rached.
Still, the priority issue, according to Hayek, is the banking sector deposits labeled in USD. Whether this money has been spent is still the subject of ongoing debate, though most experts in banking deem it so. For Hayek, the only way to deal with this issue is to stimulate capital markets through the creation of a trust that would hold the assets of the state to eventually privatize those assets and list their shares on the Beirut Stock Exchange when market conditions improve. All of this would require laws to be passed in parliament.
The French initiative calls for elections to be held within one year from the initial proposal in August, which would require that most reforms be quickly implemented by current parties in power.
Macron has delayed sending an envoy to Lebanon as of late March. It remains to be seen if the local political deadlocks will be removed to help form a government and initiate reforms, to fully benefit from the hand extended to Lebanon by its old mandatory power.
Overall, the economic solutions to Lebanon’s crisis do not seem to require as much foreign intervention as they do national willingness. The latter, sadly, is still subject to what observers deem to be political bickering, corruption and ineffective governance, which for the moment do not seem close to end.