Lebanon government 'to focus on IMF talks and reform'

MP Ali Darwish expects new Cabinet's agenda to be ready by Thursday

Lebanon’s newly formed Cabinet met for the second time on Tuesday to compile a government agenda that includes ambitious reforms to unlock millions in international loans and aid.

MP Ali Darwish, a member of Prime Minister Najib Mikati’s Azm Movement, told The National of four main priorities for the new administration.

These will be:

  • Economic reform, including an audit of the public sector and reforming the country’s public procurement laws;
  • Agreeing a bailout package with the International Monetary Fund;
  • Holding legislative elections in May next year;
  • Speeding up the investigation into the port blast that killed at least 214 people on August 4 last year.

Lebanon faces a dire economic crisis that has pushed close to 80 per cent of the population into poverty, devalued the national currency by more than 90 per cent and resulted in a desperate shortage of basics including medicine, fuel and food.

“It’s obvious that the new government needs to rectify some things, especially regarding the economy and people’s daily needs,” said Mr Darwish, who expects the ministerial statement to be ready on Thursday.

The ministerial committee charged with drafting the Cabinet's agenda is set to meet again on Wednesday. Once compiled, it will be presented to MPs who must vote to give confidence to the new cabinet and they can set to work.

The port explosion forced the resignation of the cabinet of Hassan Diab but it has taken more than a year to form Mr Mikati’s government as sectarian political parties squabbled over ministerial posts.

“There is no way out of the crisis except for negotiations with the IMF,” said former finance minister Ghazi Wazni on Tuesday during a handover ceremony with his successor Youssef Khalil.

Mr Wazni said Mr Khalil was expected to sign a new contract with consultancy company Alvarez & Marsal to conduct a forensic audit of Lebanon's Central Bank.

The audit was suspended in November because of the Central Bank’s lack of co-operation.

Analysts previously told The National it was unlikely that Mr Khalil, who worked for 39 years at the Central Bank, would use his new post to confront his previous boss, governor Riad Salameh.

Before agreeing on a bailout package for Lebanon, the IMF wants to know the scale of the losses in the banking sector and the government's restructuring plan.

Banks implemented informal capital controls in late 2019, banned transfers abroad and now offer limited credit.

Backed by MPs and the Central Bank, the sector pushed back on the previous government’s estimates of losses, causing the collapse of negotiations with the IMF in July 2020.

However, experts say it is unclear whether the new government will face fewer objections from banks, the Central Bank or politicians than the last.

Lebanese banks “are de facto bankrupt and still benefit from political protection”, Karim Bitar, professor at Saint Joseph University in Beirut, told The National. “It is unlikely that this government will have enough courage to go after powerful vested interests in the financial sector or in the various cartels and monopolies that control important sectors of the Lebanese economy."

Most of the new Cabinet ministers are close to traditional political parties that many have taken to the streets to accuse of corruption and have pushed back against reforms that would weaken their power.

“In the best-case scenario, this government will start the negotiation process with the IMF and organise legislative elections in due time,” said Mr Bitar.

Many do not expect Mr Mikati’s Cabinet to return after the general election.

Updated: September 14th 2021, 12:42 PM