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Lebanon financial crisis: why IMF assistance threatens the country with disaster

Lebanon financial crisis: why IMF assistance threatens the country with disaster

Lebanon is experiencing the worst economic crisis since the 1990s, his external debt has reached 90 billion dollars and is 170% from SMR. Authorities and experts consider international financial assistance the only tool to save the economy.

Telegram channel "Fish" talks about the causes of the crisis in Lebanon and about, what price will the country have to pay for help from abroad.

Causes of the Lebanese Crisis

Have begun in 2019 year of protests in Lebanon long background. After the Civil War 1975-1995 years, Lebanon was in dire need of investment and a stable economy to rebuild the country. One way to achieve this goal was to link the local currency to the dollar - at the exchange rate 1507.5 Lebanese pounds to dollar. Stable currency and low risk of devaluation, as well as relatively high interest rates on deposits caused a large influx of foreign capital into the banking sector.

For almost two decades, Lebanon has been a quiet and stable haven amid a flaming Middle East. The country's economy has greatly benefited from this: countries of the region, faced with political crises, preferred to invest their finances in prosperous and profitable Lebanese banks. So, Egypt’s peak investment in Lebanon’s banking sector was at the height of the “Arab spring” in 2011 year, and Iraqi investments have grown steadily since the overthrow of Saddam Hussein.

Lebanon financial crisis: why IMF assistance threatens the country with disaster

The binding of the national currency to the dollar has its drawbacks: in particular, to maintain a fixed rate, the Central Bank must have significant foreign exchange reserves. However, the inflow of foreign currency and transfers from the numerous Lebanese diaspora abroad provided the necessary funds. Foreign loans played a big role., recruited by the country.

Everything started to change after 2008 of the year, when the world economic, and then the oil crisis led both to a reduction in the region’s investments in Lebanon’s banking sector, and reduce funds, coming from Lebanese workers abroad.

Lebanon financial crisis: why IMF assistance threatens the country with disaster

Affected by another drawback pegging the Lebanese pound to the dollar: at a fixed rate importers felt at ease, and buying goods abroad has actually become more profitable, what to produce on its territory. By the beginning of the crisis, Lebanese imports by 16 billions of dollars exceeded exports - this is a huge difference, making up almost a third of the country's GDP. The fact is indicative, that in a country with a favorable southern climate imported agricultural products and food almost 3 billion, while exporting to 800 millions.

As a result, 2018 Lebanon's budget deficit exceeded 10%, and the Central Bank began to run out of currency to maintain a fixed Lebanese pound. And when there were problems with servicing foreign loans, The central bank had to impose restrictions on cash withdrawals, and the Lebanese authorities to cut back on social spending and even introduce such odious measures, as a “WhatsApp tax”. This led to a social explosion., protests and change of government.

Appeal to the IMF

Lebanon financial crisis: why IMF assistance threatens the country with disaster

At the end of April, the Lebanese government approved a plan for financial and economic reform. In addition to measures to reduce the budget deficit, there was a point in it, providing for the urgent need to receive a package of economic assistance from international organizations. 13 May the first round of negotiations with the IMF on the allocation of a tranche of Lebanon in the amount of 10 billions of dollars, which prime minister Hassan Diab called "historical moment". About, how important was this step, says at least the fact, that it was unanimously approved by all major Lebanese political parties, - and this happens quite rarely in Lebanon.

At first sight, IMF selflessly and well-meaning comes to help Lebanon in difficult times. But it is not so.

issue price

Not the IMF, no other lenders never help for free, and the case of Lebanon was no exception. The borrowing country is subject to conditions, which must be completed to obtain finance. When, if they are not met, you can forget about money.

Lebanon financial crisis: why IMF assistance threatens the country with disaster

In most cases, conditions come down to drastic cost reductions., most often due to cuts in socially-oriented budget items. properly, Lebanon began to cut spending before negotiations with the IMF: in the budget for 2020 year education costs were reduced by 7%, on health - also on 7%, in the housing sector - in 88%, and for road construction and water supply 95%.

Lebanon financial crisis: why IMF assistance threatens the country with disaster

There is no doubt that, as in the budget for 2021 year will be cut social spending.

Each member of the International Monetary Fund has the opportunity to influence the organization’s decisions in accordance with its share in the fund’s capital.. The fate of the loan, which is waiting for Lebanon, actually depends on the opinion of the USA, France, Great Britain and other countries, having the largest shares in the IMF. As a result, their authorities receive effective leverage to influence Lebanese politics and successfully use them to achieve their interests..

Lebanon financial crisis: why IMF assistance threatens the country with disaster

US obsessed with squeezing Iran out of Lebanon. The surest way is to ensure pressure on Hezbollah and further strip its legitimacy in Lebanon’s legal field. American Ambassador to Lebanon Dorothy Shea repeatedly stated, that the Lebanese army is the only legal force to protect the sovereignty of the country, alluding to illegal, according to the US, Hezbollah status. So, in May, the United States refused to supply medical care to Lebanon on the pretext of, that Hezbollah allegedly completely controls the country's healthcare system.

The USA’s “act of Caesar” became another method of influence on Lebanon, providing for massive anti-Syrian sanctions. Lebanese companies for many years helped Syria to circumvent restrictions on the supply of sanctioned goods and make cash payments, which made it possible to support the Syrian economy in war conditions. Now the United States may threaten to block the IMF loan, to put pressure on the authorities and business in Lebanon and force to refuse to cooperate with the Syrians.

Lebanon blackmailed and countries, that, it would seem, have nothing to do with the Middle East. 31 May Japan, high quota in the IMF, He stated, that will not agree to the allocation of assistance to Lebanon, before the Lebanese authorities extradite former justice to the hiding former president and CEO of Nissan Carlos Ghosn.

Lebanon financial crisis: why IMF assistance threatens the country with disaster

Ex-president of Nissan was taken into custody in Japan for providing false information about the company's finances, concealment of income and the use of company funds for personal purposes. Last year, he escaped in the best traditions of Hollywood films - hid in a box for musical instruments, which was taken out of Japan by private jet. Carlos Ghosn is now hiding in Lebanon, but in the current conditions, the country's authorities are highly likely to give out a runaway businessman to the Japanese.

conclusion

Seeking help from the IMF, Lebanon pulls itself into bondage. And the point here is not only that, that the country sits on a financial needle, provided by the organization, help from which has never ensured the well-being of countries, which she stood out.

Much greater concern is the fact, that creditor countries will receive powerful leverage to influence Lebanon, - which they will certainly use. This is especially true in the USA.: recent decades have clearly shown, that not a single Middle Eastern crisis has done without Washington. In pursuit of their own gain and the struggle for political points within the country, US authorities destroyed entire countries, and before possible economic, political and humanitarian implications the american hawks didn't care. It’s naive to suppose, that the US policy on Lebanon will be different.

Lebanon financial crisis: why IMF assistance threatens the country with disaster

But Lebanon is a multiconfessional country with a huge number of political parties., each of which has its own views on the future of Lebanon. Any thoughtless attempt from outside to redraw the political landscape in Lebanon in its own way will certainly lead to clashes within the country. In the worst case, this could result in a repeat of a long civil war and a massive massacre.. It’s just that it hardly worries the main beneficiaries of the Lebanese crisis.

A lack of, greed everything (lat. The poor lack a lot, greedy - total).

Author: fishermen

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