The execution of PRISM unfolded between August and December 2023, during which LIMS orchestrated three impactful town hall meetings held at the chambers of commerce in Beirut, Tripoli, and Jounieh. These gatherings brought together a diverse array of stakeholders, including Members of Parliament, municipal leaders, business associations, private sector representatives, and civil society members, fostering a collaborative environment crucial for advancing the cause. In tandem with these engagements, LIMS made its mark through a media blitz, delivering 130 interviews and media mentions to promote the reform. This comprehensive approach underscored LIMS' commitment to not only shaping policy but also to engaging and mobilizing key players across various sectors.

The passage of Law No. 318 is a step forward in Lebanon's journey towards a resilient and dynamic energy sector as it confirms the importance ending the monopoly of state-owned Electricité du Liban (EDL). The law also acknowledges the need for engaging the private sector in renewable energy and streamlines the legal framework for private renewable energy production on the municipal level.

However, LIMS added that this legislative measure alone is not sufficient to attract private investment into the renewable energy market and might be hindered by two challenges. Firstly, authorization requires approval from the yet-to-be-appointed Electricity Regulation Authority (ERA). Secondly, producers must sell their electricity through EDL, which faces inefficiencies and struggles with bill collection.

While the establishment of the ERA remains crucial, LIMS proposed that in the meantime, granting municipalities temporary authority to license local renewable energy projects would stimulate immediate investments. Additionally, until EDL becomes fully operational, allowing renewable energy producers to sell electricity directly via local microgrids would bypass current EDL challenges. These temporary measures could serve as a bridge towards a more robust and efficient renewable energy sector in Lebanon.

The APPLE C program (Apply Public Procurement Law to End Corruption) was conceived by LIMS to tackle the issue of monopolies in public contracts and the irregularities and corruption they cause. In the case of the airport, services are witnessing a decline, prices are soaring, and the once-thriving tourism sector is experiencing a gradual stifling. Lebanon currently receives less than 2% of the tourists in the Middle East region.

Illustrating this issue, the bidding process for the duty-free area stands as a stark example, culminating in an inexplicable five-fold surge from the opening price. This development has prompted LIMS concerns about the rationale behind opening price determination, revealing a disconcerting detachment from reality. The evident amateurism in the tendering process for critical airport services not only opens the door to corruption but also inevitably inflates the overall cost of traveling to Lebanon. In a landscape where airline fares are overshadowed by excessive taxes and fees, such practices discourage tourism even more.

Another episode underscoring monopolistic rent-seeking tendencies took place in the Ministry of Telecommunications for the contract of “packet core services”—a vital element in telecommunications infrastructure facilitating data transmission. The Ministry decided to sidestep established public procurement procedures and to select a specific company in a glaring case of irregularity, raising concern about favoritism. The Ministry defended its unconventional approach by citing concerns about avoiding a monopoly, referencing Lebanon's two mobile phone operators, MTC and Touch. Notably, the Ministry expressed apprehension that the provider of packet core services for Touch, namely Huawei, might secure the coveted Alpha contract as well.

LIMS issued a policy brief within the APPLE C program, arguing that public procurement laws explicitly prohibit the ministry from sole-source contracting. Competitive and transparent bidding processes is imperative to align with the legal standards and therefore, the Ministry should opt for an open bidding process. Rather than discarding the entire competitive framework, the Ministry could simply exclude any service provider already affiliated with a mobile phone operator, thereby ensuring compliance with the law and upholding the principles of competition. Furthermore, the duopoly of the mobile phone operators should be eliminated, and more operators should be allowed into the market, to allow a divers set of packet core service providers.

LIMS produced also produced another paper under the APPLE C, spotlighting inherent flaws within the Public Procurement Law itself. The identified loopholes serve as conduits for violations that undermine the very essence of fair and competitive procurement practices. These identified gaps include: (1) a lack of clear criteria for confidential purchases, granting ministers the latitude to designate any deal as confidential to evade scrutiny; (2) an absence of requirements for providing estimated contract values (benchmarks), enabling collusion among bidders that results in inflated prices when the government is making purchases and low income when the government is auctioning; (3) the allowance of unreasonable deadlines that discourage potential bidders, effectively creating an environment conducive to favoring crony entities; (4) the potential for mid-tender modifications, tailoring conditions to favor specific bidders and introducing elements of favoritism; and (5) the use of imprecise terminology that compromises the independence of contracting committees. These systemic issues collectively enable a circumvention of the intended purpose of the law, fostering an environment conducive to corruption and limiting competition to a single bidder. A critical amendment to the law is imperative to fortify its foundations, fostering genuine competition, and enhancing efficiency within the realm of public procurement.

Four years of economic collapse and a major currency crisis starting in late 2019 caused the Lebanese pound to lose more than 95% of its value against the US dollar and suffer from significant exchange rate volatility. However, Lebanon has seen a period of relative exchange rate stability since August 2023, hovering around 89,500 LBP/USD. 

LIMS attributes this stability to policy changes implemented by the new central bank governor. These changes involve (1) ending government financing in both LBP and USD, (2) halting the printing of LBP not backed by USD reserves, and (3) suspending the acceptance of deposits from banks due to the ongoing financial crisis. 

LIMS emphasized the importance of codifying these policy shifts into law to ensure their long-term sustainability and prevent potential policy reversals. Amending the Money and Credit Law would fortify the central bank's commitment to sound monetary policy and establish a robust framework for continued exchange rate stability. This legal framework would strengthen confidence in Lebanon's economic stability, potentially attracting capital inflows and ultimately creating a more favorable environment for economic growth.

The shift in monetary policy appears to be a key driver. The recently appointed acting governor of the Banque du Liban (BDL) curtailed money creation and terminated state financing which yielded positive outcomes in terms of both monetary and fiscal adjustments. Lebanese policymakers started to address concerns of excessive deficit, borrowing, and taxes only when they sensed that central bank’s funding dried out.

Furthermore, LIMS issues a cautionary note regarding the ostensibly eliminated fiscal deficit that rests on inflated revenue projections rather than prudent expenditure reduction. Notably, the forecasted surge in revenues, surpassing Lebanon's anticipated 1.7% economic growth for 2024 by a factor of 12, implies a calculated exaggeration aimed at obscuring the genuine fiscal shortfall.
A critical, unaddressed concern lies in the proposed 50% surge in government spending compared to 2023. This substantial increment, largely allocated to public sector employee salaries, clashes with the nation's constrained economic growth prospects. LIMS advocates for a more sustainable strategy, advocating a capped expenditure increase of 25%, aligning with economic realities rather than relying on inflated revenue projections.

Consequently, LIMS anticipates a significant deficit in 2024, coupled with an opaque funding scenario. Given Lebanon's sovereign default, the nation confronts a dilemma: an inability to meet salary obligations or resorting to the central bank's funding. Should the latter transpire in USD, it risks depleting foreign exchange reserves, exacerbating the banking crisis, and eroding remaining deposits. Opting for Lebanese pound financing from the central bank, on the other hand, resurrects the specter of hyperinflation and currency devaluation. Lebanon, it seems, stands at a precarious crossroads in the coming year.

LIMS has elucidated that a combination of various central bank circulars functions as implicit capital controls. These directives allow depositors to withdraw up to $400 per month in USD, enforcing withdrawals in Lebanese pounds for amounts exceeding the limit at a fixed rate of 15,000 LBP to USD. This translates to an 85% penalty for exceeding the withdrawal cap, serving as a formidable deterrent. The primary aim of these circulars is to curtail withdrawals and dissuade depositors from accessing their funds, reflecting the insolvency and illiquidity plaguing the Lebanese banking system.

LIMS has underscored the central bank’s challenge of adjusting the withdrawal rate to align with the current market level before instituting a bank restructuring process. A surge in withdrawal demands would compel banks to turn to the central bank for the redemption of deposits, amplifying the strain on the already depleted central bank reserves. In response, the central bank, grappling with substantial losses, would be compelled to print more money, risking an uncontrollable hyperinflation. Consequently, prevailing wisdom suggests that unifying the exchange rate necessitates the implementation of capital controls to stave off a potential bank run.

LIMS has reiterated the imperative need to disburse the remaining foreign exchange reserves to depositors as a priority, before expending further resources on failed policies, and before deciding on the suitable banking system's restructuring and loss distribution. Additionally, LIMS argued for increased competition in the banking sector by allowing new institutions to enter the market, stimulating the economy while the established banks undergo restructuring.

New Law Empowers Local Renewable Energy in Lebanon

• False Promises of Improvement: The Lebanese Electricity Sector and Lost Regional Energy Agreements, January 4, 2024: Executive Magazine, Article AR               
• Exclusive www.limslb.com: Violation of Laws and Favoritism in the Fuel Tender for December 2023, January 4, 2024: Limslb, Article AR     
• Renewable Energy Law Eliminates Monopoly in the Electricity Sector, January 7, 2024: Al Joumhouria, Article AR          
• Adjustment Of The Decision to Raise Electricity Tariff Between Arrogance and Maneuver, January 15, 2024: Mahkama, Article AR       
• Violating Laws In The Fuel Tender: How Does The Minister Of Energy Interfere With The Procurement Committee's Work? January 15, 2024: VDL, TV Interview AR
• Approval of the Law "Distributed Renewable Energy Production" ... An Unachieved Joy, January 15, 2024: Al Safa News, Article AR
• What Are The Objectives Of The Renewable Energy Law? January 17, 2024: VDL, TV Interview AR         
• Zahle's Privilege Has Ended, And The "Elixir" Of Electricity Is Subject To Partnership With The Private Sector, January 29, 2024: Al Safa News, Article AR

Public Contracts in Lebanon: A Breeding Ground for Corruption

• Beyond The "Airport Shutdown"... This Is What Dr. Mardini Revealed to "Al Hadath Online", January 16, 2024: Hadath Online, Article AR    
• Exclusive: Telecommunications Reiterates "Striking Under the Belt" and Moves Towards Voluntarily Imposing the Paket Core Service, January 23, 2024: Limslb, Article AR                   
• Exclusive www.limslb.com: Gaps In "Public Procurement" Widen To Remove Deals From The Fair Competition Framework, January 18, 2024: Limslb, Article AR

• Mardini reveals 3 scenarios for the Lebanese economy in 2024! January 3, 2024: Leb Economy, Article AR    
• How Can The Current Exchange Rate Stability Be Enhanced? January 15, 2024: Al Jadeed, TV Interview AR          
• "Bloomberg" Platform Awaits Security Stability And The Return Of Trainers For Its Use. Mardini To Diyar: It Does Not Affect The Exchange Rate But Transparency And The Central Bank's Flexibility, January 16, 2024: Addiyar, Article AR
• "Bloomberg" Platform In The Balance Of Economic Experts, January 17, 2024: Al Markazia, Article AR
• "The Central Bank" and Demands for "Stabilizing" the New Monetary Policy within Its Framework, January 12, 2024: Al Safa News, Article AR

• Why The Delay In Unifying The Exchange Rate? What Comes After Circular 151? January 12, 2024: Leb Economy, Article AR      
• This Is The Only Scenario For Deposits, January 15, 2024: Lebanon Debate, Article AR
• New Circulars From The Central Bank, January 17, 2024: El Marada, Article AR