Top Lebanese banker speaks out on how to fix what ails economy

Top Lebanese banker speaks out on how to fix what ails economy

A top Lebanese banker urged authorities to focus on the economy’s key vulnerabilities and called on the government to lean on its own assets to boost the central bank’s reserves. “The main problem that we have is the balance-of-payments deficit and this problem will not be resolved until we have a new government and we have really an economic plan and also an IMF program,”   Blom Bank Chairman Saad Azhari said in an interview with Bloomberg Television.

Lebanon, which defaulted on $30 billion in international debt a year ago, has been left with a caretaker government since Premier Hassan Diab’s cabinet resigned days after a massive blast ripped through the Port of Beirut and killed at least 200 people last August. The economy has cratered as a result, while a faltering currency peg touched off double-digit inflation. The International Monetary Fund estimates gross domestic product contracted 25% in 2020. The central bank has $16  billion of foreign-currency reserves left, down $14 billion since the beginning of 2020.

Azhari said a turnaround is possible if “a technocratic government” with “a serious economic plan” tackles Lebanon’s budget and balance-of-payments shortfalls.

‘Take Time’

“It will take time, maybe three-five years, but we can get out of the problem.” he said. The government has drafted a debt-restructuring plan that never went into effect following a backlash from lenders, the central bank and parliamentarians. The program, which became the basis for talks with the IMF, would have wiped out banks’ combined equity and introduced a haircut on deposits as it sought   to restructure the central bank’s liabilities to lenders, which amount to around $80 billion.