The announcement of an agreement in principle between the International Monetary Fund (IMF) and Lebanon on Thursday 7 April, the first concrete step in two years towards the release of an aid plan, was welcomed with satisfaction in the country of Cèdre and its foreign sponsors. It has also aroused a great deal of skepticism among those who doubt the leaders’ ability to implement the reforms left until now in abeyance, and which condition the signing of a final agreement. “This is a very important step and a first step, but a lot of work awaits us, given the complicated problems facing Lebanon,” recognizes Saadé Chami, the Lebanese chief negotiator and deputy prime minister, one of the main architects of this agreement.
At stake is the promise of aid of 3 billion dollars (2.8 billion euros) over four years under the IMF’s extended credit mechanism. This aid is now considered the only way out of one of the worst crises in Lebanon’s history, which saw the national currency lose 90% of its value, and 80% of the population sink into poverty. It is also, underlined the Prime Minister, Najib Mikati, “a visa for donor countries to start cooperating with Lebanon and put it back on the map of global finance.” With, on the horizon, the possible allocation of the $11 billion in loans and donations promised at the Economic Conference for the Development of Lebanon through Reforms and with Businesses (Cedre), in Paris in 2018 – an amount that has never been disbursed, for lack of credible reforms on the Lebanese side.
Nothing is acquired. The aid plan must first receive the approval of the management of the IMF and its board of directors. To this end, the Lebanese party has undertaken to honor a series of conditions. First there is the passage of laws on the 2022 budget, capital controls, bank secrecy and bank resolution. The government must also unify exchange rates and adopt a floating exchange rate against the dollar. It must develop a budget strategy as well as strategies for restructuring the banking sector and external public debt. Finally, reforms are expected on taxation, pensions and even energy.
“The question of political acceptability”
The schedule is tight. On May 15, the legislative elections must be held, after which the government will only manage current affairs until the investiture of a new cabinet, generally a source of long political negotiations. “There are conditions that can be fulfilled before the elections, others for which it will take more time. We will at least try to transfer all the documents to Parliament, so that the new Chamber can vote on them”, explains Mr. Chami.
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