Blom Bank, Lebanon’s largest lender by assets, believes the government will be able to usher in changes and implement the structural reforms required to rebalance the economy, its chairman said.
"Although we are going through a tough period, serious economic reforms will be ultimately implemented in areas relating to fiscal sustainabilities, governance, public enterprises and quality of investment climate," Saad Azhari told The National on Saturday at the annual World Bank IMF meetings in Washington DC.
Lebanon has the third highest debt to gross domestic product ratio currently at 150 per cent and projected to increase to 155 by the end of this year. The country is struggling to control its finances as a result of the ballooning debt that reached $86.3 billion (Dh317bn) at the end of August due to anaemic growth and the strain of hosting over a million Syrian refugees.
Instead of expanding, the economy only grew 0.3 per cent last year and is projected to slow to 0.2 per cent this year, according to the International Monetary Fund.
The country received pledges of $11bn at the Cedre international donor conference in Paris last year, which are aimed at financing infrastructure projects.
To unlock the funds, however, the government needs to implement reforms, which include lowering the fiscal deficit by 1 percentage point annually over five years, among other measures.
Despite the challenges Mr Azhari is upbeat.
“Coupled with the promised funds from the CEDRE conference, and the potential for oil and gas exploration that will start end of November beginning December, the Lebanese economy can turn around and follow a steady growth path,” he said.
“What is needed is a solid political will and consensus on reforms and a thorough understanding on the part of the public on the urgency of reforms,” Mr Azhari said, adding “though the transition period could be partly painful these reforms are highly worth it in the medium to long term".
Lebanon’s fractious system — a power-sharing formula which has glued the country together since the end of a 15-year civil war in 1990 — has also impeded progress. Political parties and their representatives dominate all major decisions related to the economy, very often in the context of a quid pro quo.
“Under the guise of the sectarian balance, the political class has replaced the separation of powers with the distribution of powers,” said Nassib Ghobril, chief economist of Byblos Bank. “As a result, real reforms have become a zero-sum game, as any progress on real reforms advocated by one side is perceived as a loss for other sides.”
Charbel Nahas, a former telecoms minister, once allied with President Michael Aoun, tweeted on Saturday: “Those in power are not at the level of responsibility.”
On Friday Prime Minisiter Saad Hariri gave his political rivals, and members of his government representing other parties, 72 hours to agree on solutions that will pave the way to ironing out the 2020 budget and hammering through much-needed reforms.