Thursday, November 21, 2019

In the midst of the daily convulsions that now characterize political life in Lebanon, it’s refreshing and somewhat disheartening to enjoy a bit of cynical comedy brought to you by leaders who are considered by many to be part of the problem. Take, for example, the notion of corruption and misuse of public funds. While many on the outside see the misappropriation of government money and sinecures as criminal, it is common practice among the political groups in Lebanon to count on a certain percentage of government jobs as literally legal tender for securing benefits for their constituencies. This dependency is part of the fabric these patriarchs are counting on to sap the revolution of its energy as people start to realize that their livelihoods are part of the system sustaining a corrupt...

Friday, November 15, 2019

Some critics say that the country is already dysfunctional, fragile, and the government immobile. While the political chieftains dither over how to retain their prerogatives, international bodies, financial and political, are readying near-death announcements. This past week, Moody’s and S&P Global reflected on the demise of the financial engineering that had propped up the Lebanese pound and ranked the country and its banks to even lower levels of junk status. With payment coming due on about $1.5 billion worth of internationally-held bonds, the Central Bank, with no formal decree on capital controls, in fact allows private banks’ largest clients to continue to move their assets out of the country. So how long can Lebanon continue its financial fast shuffle that has now slowed to a geriat...

Tuesday, November 12, 2019

Diagnosis – How Did we get Here

1.  A steadily deteriorating balance of payments over the past years has drastically squeezed, if not largely depleted, Central bank reserves. As a result, the fixed exchange rate regime, prevailing since 1997, had de facto to be abandoned. On September 30th, 2019, a two-tier exchange rate system was ushered in under Central bank Circular number 530. The circular guarantees the availability of foreign exchange (at the official rate) exclusively for the imports of three strategic commodities: petroleum derivatives, wheat, and medicines. Hard currency for all other imports or services can hence only be procured on a “parallel” market through authorized money exchangers at rates reflecting supply/demand balances.

2.  In essence, the insufficient foreign exchange...

Friday, November 8, 2019

The news is not good, and more than marginally bad…Lebanon’s financial engineering seems to have reached its limit in sustaining an artificial peg between the Lebanese pound/lira and the US dollar. The only short-term remedy is an immediate infusion of capital to support the lira. Otherwise, Lebanon simply does not have the reserves to protect the lira from devaluation that will strike the pocketbooks of the middle and lower classes hardest. And then the protestors will be really unhappy and likely take their displeasure more aggressively to the streets. 

As Maha Yahya of the Carnegie Middle East Center in Beirut recently wrote, “Lebanon’s economic crisis has reached a breaking point. Public debt is estimated at 150 percent of GDP, economic growth is negative, the dollar peg for the Lebanes...

This summary is provided by the Lebanese International Finance Executives (LIFE).  For more information please click here

As protestors take to the streets across the country, Lebanon appears to be heading towards an economic meltdown with severe consequences for Lebanese citizens of all walks of life. We are concerned that failure to tackle current problems immediately and comprehensively could result in spiraling unemployment, uncontrollable inflation, more social unrest, civil strife and a severe deterioration in public health services and other basic resources.

The challenges include a large and increasing debt load, spiraling fiscal and current account deficits, waning investment confidence, increasing political gridlock and external liquidity shortages. While we remain resolutely apo...

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