Economic recovery and the art of absorbing reforms –

Economic bodies are expected to meet with the prime minister next week to study the details of the economic recovery plan they presented to him.

Economic bodies presented an economic recovery plan to the designated prime minister, Najib Mikati, last week. This plan consists in establishing a balance between the demands of the International Monetary Fund (IMF) and the ability of the local economy to absorb the shock of the reforms. It will allow the gradual restoration of the purchasing power of the Lebanese and the relaunch of the various sectors of the real economy once the economy is on the path to recovery. “Economic organizations have excluded from their recovery plan all measures that could slow or delay an economic recovery,” Nabil Fahd, member of economic organizations and president of the supermarket owners’ union, told Here Beirut. He also points out that economic organizations are proposing a customs dollar of 8,000 Lebanese pounds as a starting point, with the possibility of gradually increasing it in the future if necessary. “What is fundamental is to allow society in all its components to absorb the shock of the reforms, without paralyzing its means of adaptation and annihilating its purchasing power”, he specifies, underlining that the customs dollar represents only 20% of the Treasury’s revenue against 45% for VAT.

No to irification

For economic organizations, the directing of bank deposits is not a solution that is part of a dynamic recovery of the economy. This provision, it is recalled, is partially in force in the context of the application of Circular 158 of the Banque du Liban (BDL). A lirification of all deposits would lead to hyperinflation due to the increase in the money supply in circulation that it would generate (in LL), increasing the pressures on the population and on commercial ones. “Banks must resume financing the economy to facilitate commercial operations,” notes the treasurer of the Beirut and Mount Lebanon Chamber of Commerce, Industry and Agriculture (CCIB). “For three years the banks have not granted new dollar credit for fear that the loans will be repaid in sterling at the rate of 1,507.5 LL. Meanwhile, entrepreneurs obtain cash in sterling by withdrawing their bank deposits in dollars, either on the basis of of Circular 151 of the Bdl ($ 1 = LL 8,000), or at the official exchange rate ($ 1 = LL 1,507.5) or through the sale of discounted bank checks in pounds ”, he says.

In response to a question, Mr. Fahd does not fail to mention the slowness of the Sayrafa trading platform mechanism which is unable to satisfy all the importers’ requests.

Sovereign Fund

The economic bodies, which are expected to meet again with the Prime Minister and his working group next week to study the details of the plan they have presented, with supporting data, have proposed the creation of a sovereign fund to recover bank deposits and reconstitute the drawers of the public treasury. A project that would have many common denominators with that proposed by the government, it is said, according to the comments of Mr. Mikati. As for the bill on capital control, economic organizations do not oppose it as long as this control does not stifle the space for action of economic agents, which is necessary to oil the wheels of a normal economic cycle.

Parliament and legislation

In this context, the question that arises is whether the bailout of the country will take place through a private sector initiative through economic organizations. The case is interesting to follow, above all because the Parliament can, even after 1 September 2022, legislate, according to a constitutional expert consulted by Ici Beirut. The Chamber of Deputies is constituted as an electoral college in anticipation of the presidential elections as soon as the Head of Legislative convenes it in plenary session for the election of a President of the Republic and not before, he observes.

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