Lebanon News

Govt warns of ‘painful steps’ to avert total collapse

Prime Minister Hassan Diab heads a ministerial meeting at the Grand Serail, Jan. 30, 2020. (The Daily Star/Dalati Nohra, HO)

BEIRUT: The new government’s policy statement calls for “painful steps” and interest rate cuts as part of a “comprehensive rescue plan” to avert a total collapse of the country’s ailing economy, according to a draft obtained by The Daily Star Sunday.

The 17-page draft statement was agreed Saturday by a ministerial committee tasked with preparing the government’s policy statement that has been meeting since Prime Minister Hassan Diab formed a 20-member Cabinet on Jan. 21.

The 12-member ministerial committee is set to meet under Diab at the Grand Serail Monday for a final reading of the draft policy statement distributed to ministers Saturday.

“The government’s policy statement will be ready Monday,” Finance Minister Ghazi Wazni said in a statement. Wazni could not be reached to elaborate on the “painful steps” planned by the government to address the dire economic and financial crisis, the worst in decades.

The government warned in the policy statement that it must rapidly take “painful steps” to avoid a “total collapse” of the economy.

“Lebanon is facing a crippling and fateful economic, financial, social, living and environmental crisis, an increasing unemployment, a severe poverty and a collapse of the infrastructure and basic services that directly threaten people’s salaries, health, housing and livelihood,” the draft statement said.

Noting that Lebanon was in the grips of “a fateful crisis” as a result of accumulated problems and challenges, the draft said: “This requires from us as officials a deep review and also taking painful steps as part of a comprehensive and integrated rescue plan.” The draft did not say what these “painful steps” are.

Seeking to appease hundreds of thousands of Lebanese who have taken to the streets since Oct. 17, calling for a change of the decades-old sectarian governing system and the ouster of the entire political ruling elite they accuse of corruption and mismanagement, the draft said: “Since the Lebanese, men and women, have clearly and bravely expressed [their views] since Oct. 17, 2019, and demanded their rights, we agreed on pledges and commitment contained in our policy statement. The requirements and reforms to which we commit essentially stem from the demands of the Lebanese.”

This is in addition to key reforms promised by Lebanon and are awaited by donor countries at the CEDRE conference held in Paris in April 2018, it said. The reforms are essential to unlock over $11 billion in grants and soft loans pledged by donor countries at the conference to finance the implementation of vital infrastructure projects in Lebanon. The Cabinet said its policy statement was founded on “a working program that includes an emergency rescue plan and a package of reforms that contains a judicial and legislative reform workshop, fighting graft and rectifying and tackling the public finances, to be accompanied by economic measures to encourage moving from a welfare economy to a productive economy.”

“It is not possible for any rescue plan to succeed if we do not reduce interest rates on loans and deposits in order to revitalize the economy and lower the cost of debt,” the draft statement said.

It added that the government was committed to implementing the rescue plan quickly “because every day that passes without implementation will cost the country and its people more losses and damage.”

“We might reach a total collapse and it will be difficult, if not impossible, to avoid it,” the draft statement said. “We feel it is our duty to talk frankly to the Lebanese people that the fateful steps and tools of remedy we are proposing will be painful.”

The government’s policy statement promised to regain the people’s confidence. “Restoring confidence is a long path that requires telling the people the truth and needs concrete achievements,” the draft said.

It called on international donors to provide soft loans to help meet the treasury’s financing needs, though it did not name any institutions or say how much was required.

The draft statement called for speeding up a second licensing round for oil and gas exploration, appointing a new electricity sector regulator, and raising tax revenues with better collection and a progressive income tax.

One of the world’s heavily indebted countries, Lebanon must decide quickly how to deal with a $1.2 billion Eurobond maturing in March.

Earlier Sunday, an official source told The Daily Star that the ministerial committee would hold a final session Monday, clearing the way for a Cabinet meeting to be held at Baabda Palace either Wednesday or Thursday to approve the draft policy statement.

Once endorsed by the Cabinet, copies of the policy statement will be sent to MPs and Speaker Nabih Berri who will then convene Parliament to debate the policy statement before a vote of confidence on the government is held, the source said.

The source ruled out a Parliament confidence vote session this week. He said if the draft policy statement was endorsed by the Cabinet Wednesday or Thursday, lawmakers would be given 48 hours to study the draft before going to Parliament to debate it.

On the political front, the draft policy statement reiterated previous governments’ commitment to the policy of dissociation from regional conflicts.

Although the government is dominated by Hezbollah and its allies and is coined as “one sided,” after the Future Movement, the Lebanese Forces, the Progressive Socialist Party and the Kataeb Party have stayed out of it, the draft statement avoided calls by Syria’s allies to normalize ties with the Damascus regime, a sensitive and contentious issue.

On the thorny issue of Hezbollah’s weapons and resistance against Israeli occupation of Lebanese lands, the government adopted almost the same formulas adopted by previous governments

“With regard to the struggle against the Israeli enemy, we will spare no effort or resistance toward the liberation of Lebanese lands that remain under [Israeli] occupation and the protection of our nation against an enemy who is still coveting our land, our waters and our natural wealth,” the draft said.

“Based on the state’s responsibility and role in maintaining Lebanon’s sovereignty, independence, unity and safety of its people, the government affirms the state’s duty and endeavors to liberate the Chebaa Farms, the Kfar Shouba hills and the Lebanese part of the village of Ghajar by all legitimate means, while stressing the right of Lebanese citizens, both women and men, to resist the Israeli occupation, repulse its aggressions and recover the occupied lands,” it added.

 
A version of this article appeared in the print edition of The Daily Star on February 03, 2020, on page 1.

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