Lebanese Cabinet approves economic recovery plan as final act

But the plan will need to be supported by the country's new parliament

Lebanese Prime Minister Najib Mikati demanded 'strong administration and co-operation between all sides'. Reuters
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Lebanon's Cabinet has approved a crucial economic recovery plan, in its final official meeting before it becomes a caretaker government, following last Sunday's parliamentary election.

The plan, which will need to be approved by the new parliament, is a critical demand from the International Monetary Fund in order for Lebanon to secure financial relief.

The IMF signed a staff-level deal with the Lebanese government last month that could eventually give the country's economy support to help pull it out of a devastating three-year economic collapse.

It includes restructuring the country’s hard-hit banking sector and amending decades-old banking secrecy laws.

The IMF and the international community have demanded that Lebanon implement wide-ranging economic and financial reforms in order to release loans and investments worth billions of dollars.

The plan foresees a full audit of the Banque Du Liban central bank's forex financial standing by July.

Then, the government “will cancel, at the outset, a large part of the central bank's foreign currency obligations to banks in order to reduce the deficit in BDL's capital,” according to a document seen by Reuters.

The largest 14 commercial banks, representing 83 per cent of total assets, would also be audited. Viable banks would be recapitalised with “significant contributions” from bank shareholders and large depositors.

The document also said the government would unify the official exchange rate, ending a system in which the government offered various exchange rates for different operations.

Lebanon's local currency has lost more than 90 per cent of its value since its economic decline began in 2019.

“The challenges that our country is facing demand a strong administration and co-operation between all sides,” Prime Minister Najib Mikati said.

“Every day that passes will cost more if we don't implement the economic recovery plan in full.”

Lebanon's Deputy Prime Minister Saade Chami said the Cabinet's approval of the financial recovery plan was a “step forward” but that parliament must now quickly adopt a number of laws.

“Once the new parliament convenes, we hope they can pass these prior actions quickly, but as you know we cannot impose it on the parliament,” he told Reuters.

There reportedly were some objections from ministers close to the Iran-backed Hezbollah group and its ally Amal.

Mr Mikati's government on Friday also approved funding of $35 million a month to buy medicines for cancer patients and those with chronic diseases for the next four months.

The Cabinet also approved an increase in telecommunication prices, starting in July.

Lebanese voters on Sunday elected a new parliament, with Hezbollah and its allies losing their majority in the 128-member legislature.

The leader of Lebanon’s largest Christian party indicated on Thursday that it rejected forming a consensus government and was preparing for a power struggle with Hezbollah and its allies.

Analysts say political deadlock could further imperil Lebanon’s finances.

Updated: May 24, 2022, 8:58 AM
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