BEIRUT (AP) — Lebanon’s prime minister said on Thursday that his government will seek financial assistance from the International Monetary Fund based on an economic and financial reform plan approved earlier in the day.
Hassan Diab described the plan adopted unanimously by the Cabinet as a comprehensive “roadmap” for dealing with the country’s spiraling financial crisis amid a currency collapse and nationwide protests.
“Today, I can say that we are going the right way to extract Lebanon from its deep financial crisis,” Diab told reporters after the meeting.
International donors have long demanded that Lebanon institute major economic changes and anti-corruption measures to unlock 11 billion dollars in donor pledges made in 2018. Despite local opposition by some parties, including the powerful Hezbollah, the IMF is now widely seen as the option available to Lebanon to secure assistance.
The plan was finalized following several days of violent confrontations between protesters and Lebanese security forces that saw dozens of angry youth vandalizing local banks in the northern city of Tripoli and the southern port city of Sidon. The violence left one protester dead and several injured on both sides in some of the most serious anti-government rioting triggered by the economic crisis amid a weeks-long coronavirus lockdown.
Lebanese politicians have traded blame over who is responsible for the crisis, the worst since Lebanon’s 15-year civil war ended in 1990.
“With this plan as a base, we … will go ahead and ask for a program with the International Monetary fund and have official negotiations with our creditors for eurobonds, and therefore ease the burden on our people,” Diab said.
The country’s economic crisis rooted in decades of corruption and mismanagement deepened after nationwide protests against the political class erupted in October. Meanwhile, banks have imposed informal capital controls, limiting withdrawal of dollars and foreign transfers in the country, and the cash-strapped government announced in March it is defaulting on its sovereign debt for the first time.
Most are now looking to the IMF, hoping the economic rescue plan opens the door for talks of financial assistance. So far the IMF has only offered Lebanon technical assistance and the government has not formally sought financial support.
Panic and anger have gripped the public as they watched the national currency, the Lebanese pound, which has been pegged to the dollar for almost three decades, plummet, losing more than 60% of its value in recent weeks. Public debt has soared while the economy contracted and foreign inflows dried up in the already heavily indebted country that relies on imports for most of its basic goods.
The tiny Mediterranean country of about 5 million people is one the most indebted in the world, with the national debt forming nearly 170% of the GDP. Nationwide protests broke out in October against the country’s political class because of widespread corruption and mismanagement of resources.
Diab said the five-year plan aims to reduce the current account deficit to 5.6% and to secure $10 billion of external support — in addition to the $11 billion pledges in 2018 by international donors.
The plan also envisions growth would return to positive in 2022 and promises assistance for the needy. The plan also aims to restore an initial budget surplus by 2024, structuring the sovereign debt portfolio and reducing the ratio of public debt to GDP to less than 100 % from the current 170%.
“I call on all Lebanese to consider this day as a turning point for a better future for our country. The road ahead will not be easy, but our determination and optimism will help us overcome our difficulties as we look to better days ahead. If we all unite, we will definitely reach the desired success in the future,” Diab said
Diab’s government came to office in January after his predecessor, Saad Hariri, stepped down in the face of mass protests. But the new Cabinet quickly became embroiled in a nationwide health crisis over the novel cornavirus, a crisis that deepened the country’s economic recession.