June 2020

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Here’s How We Made a Lasting Impact in June 2020
4th Edition of LIMS Leaders’ Academy - LLA
LLA 101 – Economic Foundations of Prosperity
 
The 4th edition of our yearly LIMS Leaders Academy (LLA) gathered 11 senior staff members from 7 different political parties for a 2-day workshop. They discussed the government’s recovery plan, the implications of the Lebanese economic crisis, obstacles to businesses and investments in Lebanon, the consequences of the recently adopted price controls on the economy, and the impact of high levels of public sector employment. Expert speakers from Bahrain, Canada, the United Kingdom, and Turkey intervened live online and microphones were distributed to all attendees, to allow a smooth interaction with speakers.
 
Click Here To View Day 1 Photos
Click Here To View Day 2 Photos
UNITE - UNdefeated Influencers to Transform the Economy
June 20-21, 2020- Hilton Grand Habtoor, Sin El Fil, Lebanon
 
This year’s Leaders’ Academy was also opened to prominent groups engaged in the November 2019 protests.  99 influencers belonging to 59 different groups gathered for a 2-day workshop, entitled UNITE, that was held in parallel to the political parties’ workshop. Activists met for the first time, interacted and worked together. Amidst a global pandemic and Lebanon’s economic shutdown, LIMS successfully pulled-off the first step of UNITE, LLA 101, incorporating extreme safety precautions and social distancing measures.
Day 1: Lectures and Elevator Pitch

On the first day, participants attended 3 lectures and had the choice between 3 concurrent sessions for each lecture. At the end of the first day, all attendees gathered in 1 room for the elevator pitch session. 22 participants took the stand and presented in one minute, a topic they wish to address in UNITE. Topics included: education reforms, fighting monopolies, judicial independence, women’s empowerment in the economy, combating corruption, the importance of tourism, etc. The room was buzzing with ideas, as activists with similar interests bonded.
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Day 2: Forming Working Groups
 
The second day of the workshop started with a speed exchange session where participants presented themselves, in a series of one-on-one exchanges. During the activity, social distancing was still maintained as rows and seats were kept one meter away from one another. Then in a plenary session, Dr. Patrick Mardini presented an alternative fiscal policy focused on cutting taxes and dismantling government monopolies, while Dr. Layal Mansour suggested the adoption of a currency board to solve the Lebanese pound crisis.
In the afternoon, participants brainstormed the main problems facing the Lebanese economy and decided to form 9 groups each working on a different topic.  Facilitators were involved online, by guiding the discussion. Each group delegated a representative to share and discuss the suggested reform with a panel of international and local experts. The following topics emerged:
  1. Currency Board: A Solution to the Currency Crisis
  2. The Ability of Decentralization to Develop the Regions: The Case of Tripoli
  3. The Recovery of Stolen Assets
  4. Encouraging Foreign Direct Investments in Lebanon
  5. A Solution for the Crisis Facing Private Schools
  6. Revitalization of Tourism to Boost the Economy
  7. Lebanon’s Economic Identity
  8. 8. Food Security in Lebanon
  9. 9. The Revival of the Railway through Private Initiative
These topics will be further developed in the future steps of UNITE.
Click here for more pictures
A Currency Board Would Stop the Lira’s Collapse  
The Lebanese pound (also called the lira) is suffering from a 75% decline against the dollar, from 1,500 Lira to the dollar against more than 6,000 Lira to the dollar on the black market. The currency’s devaluation came during an economic recession and banking crisis where people lost their jobs, businesses, and the ability to withdraw their life savings from the bank. Now, they are being hit by brutal inflation. The government asked the central bank to start pumping dollars into the market from its foreign reserves to stabilize the currency.
LIMS gave 4 TV, 1 radio, and 3 newspaper interviews on this topic and explained that the lira’s decline is due to printing money, as a way of financing both current and previous government expenditures. The recession has led to a sharp decrease in government income, while the sovereign default depleted the treasury’s ability to borrow. Therefore, instead of conducting the hard but necessary reforms focused on cutting public expenditure, decision makers chose to finance excessive spending through printing more money. The same money is also used to reimburse depositors, as the central bank decided to compel depositors with dollar accounts to take their money in liras, should they decide to withdraw, at an exchange rate below the black market rate. Given the incredible increase in lira supply, the central bank cannot possibly have enough dollars to inject into the economy. Government suggested policy will only lead to squandering what remains of people’s deposits.
LIMS also argued for adopting a currency board in Lebanon, to stop excessive printing of money and impose a hard budget constraint on the government. The currency board would only be able to issue liras that are 100% backed by dollar reserves, which would ensure full convertibility. The lira would be trading at an absolutely fixed exchange rate and the quantity of money issued would be determined by market conditions.

LIMS Media Interviews:

  • Dollar Surges as Budget Deficit Widens, Al Yawm TV, June 28, 2020, TV Interview AR
  • Lebanese Pound Continues to Depreciate, Janoubia, June 4, 2020, Interview AR
  • Government Should Stop Injecting Money into Economy, VDL Radio Station, June 12, 2020, Radio Interview AR
  • Government Finances Spending by Printing Money, OTV, June 8, 2020, TV Interview AR
  • A Government Spending Spree Pushing the Pound to Record Low, France 24, June 30, 2020, TV Interview AR
  • Printing Cash to Try Escaping Crisis Will Destroy Economy, France 24, June 12, 2020, TV Interview AR
  • Lebanon on a Downward Spiral as Government Prints Money, Al Estiklal, June 27, 2020, Interview AR
  • Central Bank’s Desperate Move against the Dollar Surge, Independent Arabia, June 17, 2020, Interview AR
Subsidies: Another Policy to Squander People’s Deposits
The sharp devaluation of the pound went hand-in-hand with an explosion of inflation in the country. The Lebanese government reacted by subsidizing fuel items, which lead to massive smuggling of fuel to Syria and a domestic shortage.
 
LIMS gave 1 TV and 3 newspaper interviews on this topic criticizing the policy and explaining that subsidies are a “feel good policy” that harms the poor and deprives them from vital subsidized commodities. Why would anyone sell diesel at the subsidized price of 11,000 liras when it could be sold on the black market for 17,000 liras or smuggled to Syria for 22,000 liras? Subsidies, in all actuality, led to a shortage of diesel, a necessary commodity to operate electricity generators, which in turn caused electricity outages. The domino effect is monumental, since electricity is used in every aspect of production.
LIMS also highlighted that the money used to finance these subsidies comes from foreign exchange reserves held by the central bank which represents, in reality, the remainder of people’s dollar deposits in commercial banks. Subsidies are therefore responsible for the transfer of depositors’ withheld dollars to the pockets of smugglers and black market traders. The cost of this operation will be impacted by depositors, who could witness a larger than expected haircut on their deposits. They may also suffer from a larger devaluation of the lira, while being forced to withdraw their dollars in liras at an official rate below the market rate.

LIMS Media Interviews:
  • Smuggling Increases to Syria Due to Subsidies, Anadol Agency, June 9, 2020, Interview AR
  • Subsidizing Goods Incentivizes Smuggling to Syria, Nidaa Al Watan, June 24, 2020, Interview AR
  • Government Wastes Remaining Reserves on Subsidies, An-Nahar, June 25, 2020, Interview AR
  • Cutting Subsidies and Market Competition Key to Lebanon’s Salvation, OTV, June 26, 2020, TV Interview AR
Government Reform Plan Fails to Solve Crisis
The Lebanese government suggested a recovery program in the hope of striking a deal with the International Monetary Fund (IMF). The government’s plan is to wipe out about 62% of public debt and to transfer it alongside the central bank’s losses to commercial banks. As a result, most Lebanese banks will become insolvent. The government therefore suggested shrinking the number of Lebanese commercial banks from around 50 to 10. Additionally, the government plans to maintain most expenditure, while promising to increase taxes.
Lebanese banks asked the government to consider a counter-proposal that would include no government defaults. Instead, banks would accept lower interest payments on government bonds and a rescheduling of payments. They also suggested the creation of a sovereign fund that would manage government assets like the telecommunications networks, waterfronts, and real estate assets that. Income from the sovereign fund would be used to pay off the debt.
LIMS gave 4 newspaper interviews on this topic and expressed worries about government’s restructuring plan of the banking system in Lebanon. Cronies might end up putting their hands on the banking sector and converting the financial industry into an oligopoly of 10 banks controlling the market. LIMS also advised the government against raising taxes that would destroy more businesses and suggested instead: (1) cutting government expenditures, (2) enhancing checks on public tenders, and (3) allowing private companies to compete with government monopolies. As for the suggested sovereign fund, LIMS showed the inability of the fund to pay back debt, especially since the assets would remain government-managed.  
LIMS Media Interviews:
  • Government Plan Unable to Resolve Current Crisis, Nidaa Al Watan, June 2, 2020, Interview AR
  • Tensions Rise as Government Plans to Liquidate Select Banks, Al Monitor, June 9, 2020, Interview EN
  • Increasing Taxes Would Aggravate Problem, Reduce Revenues, Alaraby.co.uk, June 3, 2020, Interview AR
  • Lebanon's Ministers Run Away from Governance and Avoid the Scrutiny of the Tenders Department, Al Khabar, June 7, 2020, Interview AR
COVID-19: Time to Allow Visitors to Lebanon
Lebanon is negotiating with the IMF, to try to secure loans in hard currency that would amount to $4 billion to be paid over 4 years, provided that the annual payment does not exceed $1.3 billion. LIMS gave 3 interviews and drafted 1 op-ed explaining that tourism revenues in Lebanon ranged between $7 and $8 billion annually between 2010 and 2018. Although tourism revenues declined in 2019, they still match, in one year, the total of what Lebanon aspires to obtain from the IMF over a period of 4 years. LIMS urged the government, to follow the example of Cyprus, Lebanon's direct competitor in the tourism sector, and reopen the airport for international flights, while ensuring all safety and prevention measures are followed.
LIMS Media Interviews:
  • COVID-19 Lockdown Still in Place, Drives More Businesses to Close, Janoubia, June 4, 2020, Interview AR
  • Tourism Could be Highly Beneficial to Lebanon Amidst Crisis, Al-Joumhouria, June 9, 2020, Op-Ed AR
  • Reopening Airport Could Help Revive Shaky Economy, Xinhua Net, June 13, 2020, Interview EN
  • Negotiations with IMF Will Require Eliminating Subsidies, Hawar News, June 3, 2020, Interview AR
LIMS Participates in Africa Liberty Forum 2020 
June 18, 2020- Atlas Network, Washington D.C., United States

The 2020 Africa Liberty Forum, an event hosted by Atlas Network, was held in a virtual format, with the discussion topics ranging from overcoming organizational obstacles, technological matters, and infrastructure issues, not to mention the corona-virus impact, with participants from a variety of countries. LIMS President Dr. Mardini was a moderator for one of the event’s sessions, discussing how to build an organization or think tank and improve fundraising, marketing, internal structures, and practical know-how to succeed. As well, Director of LIMS Ms. Mardini took part in the virtual conference, by speaking of LIMS’ mission, the Leaders’ Academy program, promoting the idea of a currency board in the country, and how the corona-virus pandemic has only exacerbated the economic uncertainty in Lebanon.
Article in English
Africa Liberty Forum:
Dr. Mardini’s Session in French,
Ms. Mardini’s Session in Arabic
Can Cryptocurrencies become the solution for Lebanon Amidst Devaluation?

As the banking sector and the mass public are starting to feel the harsh impact of Lebanon’s financial crisis, both sides are searching for alternative monetary solutions, to ease Lebanon’s financial fiasco. Some people started to rely on Bitcoins, currently traded monthly between people in Lebanon using an informal network. However, as the network’s fees have increased, people are shopping for more affordable options, and so bitcoin-style digital currencies appear to be a more attractive system.
LIMS Media Interviews:
Lebanon Torn Between the West and the East
 
The United States has passed the Caesar Act, which prohibits countries from financially benefiting from the Syrian regime. Lebanon has a long border with Syria and is extensively used for trade. The Caesar Act will create economic burdens on some Lebanese businesses involved in Syria and some Syrian businesses that have relocated to Lebanon during the Syrian war. Individuals that were betting on the reconstruction of Syria in the coming years will also be affected.
As an alternative, some pundits have suggested disconnecting Lebanon from the west and joining the eastern camp, led by China. They claim that Chinese investors are lining up and waiting for Lebanon’s green light to fix all the countries’ infrastructure. LIMS explained that the Lebanese government does not have money to spend on infrastructure. The institute advised for allowing all companies to enter transparent public tenders based on a build-operate-own or build-operate-transfer model that would not require any government funding. Given the current meltdown, we really doubt that anyone would be interested in coming in.

LIMS Media Interviews:
  • Caesar Act to Put More Pressure on Lebanese Economy June 15, 2020 - El Ektisad, Beirut, Lebanon Interview AR
  • Lebanon Seeks Investors from the East, Al Kalima Online, June 21, 2020, Interview AR
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