2023-07-19 16:55:55
For nearly four years, Lebanon has been witnessing a monetary and economic crisis that caused the collapse of the financial and banking sector, which was considered one of the most important pillars and pillars of the country’s economy.
This crisis led to the collapse of the exchange rate of the Lebanese pound against the US dollar, to the current level of 92,000 Lebanese pounds, from 1,500 Lebanese pounds in the fall of 2019, amid the inability of banks to return dollar deposits to depositors, in light of the scarcity of hard currencies and the decline in foreign currency reserves in the country. to record low levels.
According to the Banque du Liban, the value of the country’s reserves in foreign currency declined, to $9.28 billion at the end of June 2023, compared to $36.39 billion at the end of June 2019, that is, a few months before the start of the crisis in Lebanon, while the Banque du Liban is preparing to enter a stage The vacancy in his governorship at the end of this July, with the termination of Governor Riad Salameh’s term, amid questions about the fate of decisions and procedures related to monetary and financial policies in the next stage, especially since the picture was not clear regarding the identity of the person, or the party that will succeed Salameh, as there is a vacancy in the position. Governance will have negative effects on the stability of the economy, given the ruler’s role in determining monetary policies and managing the Lebanese financial system.
The Lebanese Parliament has not been able to elect a new president since the start of the presidential vacuum on November 1, 2022, nor has it succeeded in forming a new government, since the completion of the last parliamentary elections in May 2022, or until the adoption and implementation of the “Capital Control” law, which helps in Reducing the evaporation of the reserves of the Banque du Liban, relieving pressure on the foreign exchange market, and preserving deposits of depositors.
Sabine Aweys: Lebanon is economically helpless because of the political division
A reform plan of 5 axes
For its part, the International Monetary Fund believes that the scenario that Lebanon must follow to achieve economic recovery depends on a reform plan consisting of five main axes, which are restructuring the banking sector, renewing monetary policy, adopting a new fiscal policy that achieves debt sustainability, and addressing the situation in institutions. and strengthening anti-corruption, money-laundering and counter-terrorism frameworks.
And at a time when most of the proposed reform plans for Lebanon focus on the necessity of reforming the financial system and adopting a new approach, the former Minister of Finance in Lebanon, Raya Al-Hassan, says, in her interview with “Sky News Arabia Economy”, that confidence in the financial system cannot be restored, if it is not There is no acceptable political stability, as it is clear that the important positions in the Lebanese state administrations are emptied, without a political consensus to fill the vacancy, whether in the position of the presidency of the republic, or in the governance of the Central Bank, in addition to the vacuum that threatens the army leadership, after about four months. From now on, considering that restoring confidence in the Lebanese financial system cannot happen before a kind of political stability occurs.
According to Al-Hassan, the process of restoring confidence will take place gradually, and it requires cumulative reform processes that may take 3 to 4 years, and this requires a political consensus, on a future road map, and the approval of reform laws in Parliament, wondering is there currently a national consensus on this path?
Al-Hassan believes that the vertical division in Lebanon is not only political, but also economic, stressing the need for political stability, to be followed by a discussion of Lebanon’s economic identity, noting that it is a cumulative process that requires organizing the worn-out departments and departments of the state.
The International Monetary Fund is sounding the alarm about Lebanon
Get rid of the cash economy
For her part, the rapporteur of the Economic Committee of the Businessmen Union for Support and Development, Irada, Ola Sidani, said in her interview with “Economy Sky News Arabia” that in order to shift to a better financial system for Lebanon, the cash economy must be disposed of and the banking sector reformulated, by adopting The classic basic principles of any economy, and for the financing of any economy, stressing that there must be a sound and correct banking system, in conformity with international standards, in addition to the importance of governance, whether in monetary policy and public financial policy, or in the relationship between banks and the Bank of Lebanon, and in any Tools in which people should invest their money.
Sidani saw that large companies in the private sector are suffering from an increase in costs, while small and emerging companies have become almost destitute, as are individuals, and the current system cannot finance them, and therefore the economy cannot grow without achieving these things.
Sidani considered that the Lebanese economy in the region and in the world is services, but the service economy must be in a productive, not rentier sense, as services are marred by risks such as wars, epidemics and crises, such as the tourism sector, which is disrupted in any crisis, which requires the need to focus on reducing risks. On diversifying investments, we will not reach the positive trade balance, but the damage and problems in the economy must be reduced, in addition to strengthening relations with the Arab countries, which are the main trading partners, and moving towards new markets.
Since the beginning of the crisis in Lebanon, the country has turned to a cash economy, in light of the refusal of most individuals and merchants to deal with the tools provided by the current banking system, for fear that their money will be seized and deducted again.
The World Bank had warned of the growth of the monetary economy in dollars in Lebanon, after it is estimated at half of the gross domestic product in 2022, and threatens fiscal policy and increases money laundering and tax evasion.
In its report, the bank estimated the dollarized monetary economy at about $9.9 billion in 2022.
Lebanon is facing a watershed stage before the economic disaster
A new approach different from the previous one
For his part, Lebanese Minister of the Environment Nasser Yassin believes, in an interview with “Sky News Arabia Economy”, that when talking about the new financial system, which Lebanon must follow, it is necessary to think in a new and different way from the policy that was followed in previous periods, such as the ease of obtaining the public sector On funds through borrowing from any party, in addition to the private sector’s reliance on a large part of it on government spending or monopoly, indicating that these policies were protected by successive politicians and governments.
Yassin pointed out that adopting a new financial approach will not be easy at first, as restoring confidence begins with being frank with people and helping them to accept or understand what happened previously, indicating that this role must be played by the official authorities and the banking system, who had an essential role in what happened previously.
According to Yassin, in addition to investment funds, Lebanon must benefit from financing related to climate change, as it is one of the means of financing that is still unheard of in Lebanon, where there are hundreds of millions or billions in case the transition of some sectors to green financing is properly planned. Investing in alternative energy, water management, transportation, etc.
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