Draft of Lebanese cabinet’s rescue plan includes ‘necessary and painful steps’

Lebanon’s newly appointed Cabinet is set to adopt a policy statement on Monday laying out an ambitious range of economic and political reforms to be carried out by the new government.

The draft plan, which was obtained by Al Arabiya English ahead of the vote, notes that in the face of the economic crisis the country is facing, “the steps and treatment tools that we will propose will be painful,” but adds that “people will know or may one day recall that it was necessary.”

Lebanese Minister of Information Manal Abdel Samad released a statement on Monday saying that the Cabinet will be meeting on Thursday to approve their policy statement in its final form.

The plan did not specify what the “painful steps” would be but called for reducing interest rates on loan and deposits and reducing the cost of debt as part of any economic bailout plan. It also noted that the government hopes to reduce debt service costs through cooperation between the finance minister and the central bank, an arrangement that officials also counted on as a path to deficit reduction in the budget passed last week.

The statement calls for steps to combat tax evasion and reforms to the tax code, merging or eliminating some public institutions, and reducing the massive annual deficits of the state power utility, Electricite du Liban (EDL), in part by increasing tariffs “in a way that does not affect the poor and low-income classes.”

The plan also calls for international support and pledges to carry out the reforms required to unlock the $11 billion in funding promised to Lebanon at the CEDRE conference in Paris nearly two years ago.

However, as to what form that international support would take, Tamirace Fakhoury, Associate Professor of Political Science at the Lebanese American University, noted that the plan remains vague.

“For example, when it comes to international funding, who is going to fund?” she asked. That question, she said, is “one of the most controversial aspects – whether Lebanon is going to embark on IMF funding or whether it will resort to an endogenous domestic plan which will overhaul Lebanon’s economic structures and allow it to respond from within to the economic meltdown that is happening.”

Apart from promising to tackle the country’s economic crisis, the plan pledges to prioritize some of the reforms that have been called for by protesters since the outbreak of ongoing mass anti-government demonstrations in October, saying that “many of the demands of the movement are not only right, but they are at the heart of the plan.”

For instance, the ministerial statement promises to create an action plan to ensure the independence of the judiciary and a national plan to fight corruption and to tackle the recovery of embezzled public funds.

The statement promises that the government will investigate illegal transfers of funds abroad since October 17, 2019. In recent months, in response to a shortage of dollars in the system, banks have placed strict limits on withdrawals and transfers for most account holders, but economists and others have alleged that politicians and other powerful figures managed to circumvent the rules and get billions of dollars out of the country.

The plan also promised to tackle several social and governance issues that civil society advocates have been pushing for, including stronger domestic violence laws and legislation to give Lebanese women married to non-Lebanese men the right to grant nationality to their children.

Nadim el Kak, a researcher with the Lebanese Center for Policy Studies, said the ministerial statement “raised more questions than it answers.”

“This statement is filled with such lofty objectives, but often lacks the details needed to explain how the cabinet plans to accomplish its goals,” el Kak said.

“And while it includes measures that protesters have been calling for, such as judicial independence and going after looted funds, past statements have also included these promises,” he added.

In terms of the economic aspects, he added, “The lack of details on how restructuring of the banking sector and the debt will occur is most troubling, because it signals one of two things: they either don’t know what to do yet, or they are unwilling to have large depositors, bank owners, shareholders, and directors carry their fair share of the burden.”

Upon approval by the Cabinet, the proposal will go to the Parliament for a vote.