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Corona Worsening Economic Crisis in Lebanon
March 26, 2020- VDL Radio Station, Beirut, Lebanon
Most economies in the world have witnessed a huge downfall since the start of the coronavirus pandemic. Lebanon however was already facing an economic crisis and corona has aggravated the situation. Dr. Patrick Mardini explained that the government is late to implement major reforms that would revitalize the collapsing economy, such as reducing taxes and tariffs, dismantling monopolies, and reducing public spending. He indicated how these reforms would not only help the poor in the short term, like direct financial aids given in other countries, but would also provide them with sustainable jobs for the long term.
Click Here to Listen to the Interview in Arabic |
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Lebanon’s Capabilities Weak Against Corona Pandemic
March 11, 2020- MTV Lebanon, Beirut, Lebanon
Lebanon was amidst a financial crisis and on the verge of default when the corona pandemic hit. Dr. Mardini described how Lebanon had witnessed a 1% contraction in 2019 where many businesses closed, and many people lost their jobs. He then added that the corona pandemic had a huge effect on the world economy and will undoubtedly have a severe effect on Lebanon’s already collapsing economy. He warned that as the pandemic goes further, Lebanon will have difficulty allocating its remaining reserves between subsidizing wheat, fuel, and medicine, along with the medical supplies needed to fight the virus. He suggested removing all trade barriers such as tariffs in order to decrease prices on people during these tough times.
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Lebanon Can’t Afford to Buy Medical Equipment for Corona
March 18, 2020- Al Jadeed TV, Beirut, Lebanon
As the coronavirus has started spreading across Lebanon, specialized medical supplies are in need. With little foreign reserves left at the central banks, it becomes tougher to buy these expensive supplies. In his interview, Dr. Mardini stated that the current situation will exhaust the remaining reserves at the central bank and will force officials to devaluate the currency officially. As for the donations to fight the pandemic, he explained that local donations in foreign currencies will further exhaust the foreign currency reserves since banks have deposited most of the money in their possession at the central bank who is already using it to finance essential needs.
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Corona Pandemic Increasing Power Supply in Lebanon
March 12, 2020- Al Joumhouriya Newspaper, Beirut, Lebanon
With the price of fuel hitting as low as $31 a barrel, sources at the state-owned electricity company EDL are expecting less power outages, despite the government halving subsidies to the sector. During his interview, Dr. Mardini urged the government to change the price consumers pay for electricity, while fuel prices are low and adopting index variable pricing. The variable pricing would eliminate losses to the government incurred by a change in fuel prices. He also added that the electricity tariff was put, assuming a price of $20/ barrel whereas prices have sometimes reached more than $100/ barrel, thus aggravating losses on the government.
Click Here to Read the Article in Arabic
Shared by Other Media Outlets: Kataeb.Org, Lebanese Forces , Lebanon Economy, Lebanon 24, Beirut News, Sawt Beirut, , Anbaa Online, El nashra, BintJbeil, E for Ektisad, Alankabout.com
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Corona Worsens Crisis and Government Nowhere in Sight
March 27, 2020- Al Joumhouriya Newspaper, Beirut, Lebanon
Lebanon has been facing unsolvable problems related to its sovereign debt, sluggish growth, banks heading toward bankruptcy, and uncontrolled government spending. To make things worse the new corona pandemic has exacerbated the economic situation with struggling businesses facing more pressure. Dr. Mardini contrasted this situation with other economies who were witnessing booms and very low unemployment before the crisis, which helped them better cope with the spreading virus. He then urged the government to take drastic measures to help businesses such as eliminating taxes, tariffs and social security plans, which would decrease the probability of business closure and lower unemployment during these tough times and
Click Here to Read the Article in Arabic
Shared by Other Media Outlets: Al Sadara News, New Lebanon, MTV News, Tawasal.com, Vdlnews.com, Nabd, Lebanon 24, Institut des finances, E for Ektisad, Lebanese Forces, Elmarada.org
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People Protesting about Poor Conditions Despite Pandemic
March 29, 2020- Al Jadeed News Report, Beirut, Lebanon
According to recent numbers, it was estimated that 40% of people in Lebanon are below the poverty line and this number is likely to increase to 50%, not taking into consideration the coronavirus outbreak. Despite the virus, people marched on the streets protesting over the poor conditions they have reached. Dr. Mardini urged the government to stop all subsidies on goods and services, which benefit the rich and the poor, but incurs huge burdens on the government. Instead, he suggested giving direct cash handouts to the poorest families, while ensuring that this process is free from political interference and patronage.
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Lebanon’s Default on Eurobond March Maturity
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How to Resolve the Financial Crisis and Sovereign Default of Lebanon. A Blueprint
March 25, 2020- Journal des Libertés, Paris, France
In an article, Dr. Patrick Mardini explained how Lebanon has reached a situation where it is facing a quadruple crisis: a monetary crisis, public debt crisis, financial crisis, and economic recession. He then suggested that the only way to avoid a long-lasting recession, is for the government to dismantle the current state-protected monopolies, which would revitalize the economy sooner. Dr. Mardini also added that financial reforms are necessary so bank account holders do not shoulder the burden of all losses. Such reforms would include reevaluating the losses of each bank’s capital and then determining whether it can absorb the losses, or if it needs to be recapitalized or liquidated.
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No Solution but for Government to Default
March 4, 2020- OTV, Beirut, Lebanon
In all honesty, the government has reached a point where it can no longer pay its debt obligations. Dr. Mardini explained that in case it decides to make the upcoming payment, the reserves in foreign currencies will reach a critical point and it will no longer have enough to pay any other maturing Eurobonds. He stated that this leaves the government with only one choice, defaulting now, negotiating with creditors, and keeping the few remaining reserves for essential needs.
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Lebanese Government Defaults on its Eurobond Obligations
March 7, 2020- France 24, Paris, France
Earlier this month, the prime minister announced that Lebanon will suspend the payment on its debt obligations mostly held by Lebanese banks and the central bank. Dr. Mardini explained that the government is strengthening its position to negotiate with creditors, especially after the financial prosecutor froze all banks’ assets. He then argued that the government’s position will remain weak given the lack of clarity on how the government plans to cut spending, since some of the solutions it has proposed would have the opposite effect.
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What Would Happen if the Government Payed Its Creditors?
March 7, 2020- Annahar Newspaper, Beirut, Lebanon
Currently, the Lebanese government has a $1.2 billion debt maturing this March. It will also have to pay debt maturing in April and June. The overall amount to be paid this year will reach $5.2 billion which the government does not have. In his interview, Dr. Mardini highlighted that defaulting could have unwanted legal consequences, such as seizing its assets. However, he explained that paying off the debt would be at the expense of depositors whose money are frozen at banks. Dr. Mardini expressed his concern over a possible “Venezuelan” scenario in case the government does not control spending, in turn causing rampant hyperinflation.
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Looming Consequences of Lebanon’s Default
March 15, 2020- Al Majalla Online Magazine, Beirut, Lebanon
Lebanon’s Prime Minister Hassan Diab announced that Lebanon will not be capable of paying its debt in foreign currencies. This comes after gross public debt reached an all-time high of $92 billion or 170% of GDP. Dr. Mardini pointed out that the government is trying to secure a superior position at the negotiating table with creditors. The downfall is, he explained, that it now lacks the ability to secure liquidity to pay off salaries, fuel, food supplies, and the healthcare sector. Defaulting on its debt has suppressed the government’s ability to borrow and secure necessary funding which puts the government in a debacle. He urged the government to downsize in order to resolve the crisis.
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Lebanon’s Financial and Economic Crisis Aggravating
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Lebanon Might Take a Decade to Recover
March 8, 2020- Al Jadeed TV, Beirut, Lebanon
Lebanon has witnessed sluggish growth for the past decade. With government spending increasing, infrastructure worsening, and monopolies hindering private sector growth, the economy took a downturn and people have lost hope of salvation. In a live, one-on-one interview, Dr. Mardini showcased that Lebanese peoples’ deposits are no longer available, since they were lent to the government who spent them on wasteful projects and can no longer repay. This has caused banks to implicitly impose capital controls. He then added that the government’s inability to repay its debt has put it in a debacle, since it does not have enough money to cover salaries and current expenses, and can no longer borrow money from creditors because of the default.
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Dr. Mardini stressed on the importance of going through painful reforms to quickly recover from the crisis. These reforms must first include cutting public spending by eliminating all subsidies and downsizing the public sector by getting rid of overstaffing currently happening in all ministries. Second, he emphasized on removing all monopolies in electricity, telecom, water, aviation, roads, and ports to provide the much-needed ground for businesses to prosper and to put the faith back into the Lebanese economy again.
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Keeping Peg will Exhaust Central Bank’s Reserves Soon
March 11, 2020- MTV Lebanon News Report, Beirut, Lebanon
While the Lebanese government has been insisting on keeping the peg, markets have devalued exchange rate by around 50%. In his interview, Dr. Mardini stated that the peg has been contributing to a nationwide subsidy of essential goods such as medical supplies, fuel, and bread. This path is unsustainable and will exhaust the central bank’s foreign reserves in less than a year. He also explained that allowing the Lebanese pound to depreciate will incentivize exports and allow people to withdraw their dollars from banks at the real exchange rate.
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Central Bank Caps Dollar at 1,950 LBP Causing Shortage
March 7, 2020- Nidaa Al Watan Online Magazine, Beirut, Lebanon
The Central Bank of Lebanon (BDL) issued a memo forcing exchange offices to buy the dollar at a maximum of 30% above the peg, causing a dollar shortage for importers and a black market to set in motion. Dr. Mardini stated that this enforcement will create a third “parallel” market at a much higher rate, since it has become illegal to trade at the real rate. He also added that the central bank tried to enforce this policy before, but it did not last for more than a few days, as most daily essentials are imported, hence the huge need for dollars.
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Capital Control Law Should Be Reassessed
March 16, 2020- Nidaa Al Watan Online Magazine, Beirut, Lebanon
At the start of the Lebanese crisis, people rushed to withdraw their money from banks. The latter quickly imposed unofficial capital controls, especially on dollar accounts to limit the drain. As a consequence, officials have been working on passing a law that would give the central bank the authority to set a limit on foreign currency accounts. Dr. Mardini stated that the discussed daft has a severe consequence on fresh money coming into Lebanon, which might be subject to capital controls as well under this law.
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Unemployment, Inflation, and Poverty in Lebanon, What Happened?
March 13, 2020- Anadol Agency, Beirut, Lebanon
Since October 17, the Lebanese pound has been depreciating nonstop. Many businesses from all sectors shut down and thousands of workers became unemployed. Dr. Mardini stated that this will aggravate the level of poverty in Lebanon, which surpassed 1.5 million individuals in 2017 according to a United Nations study. He also reported that the economy will contract by more than 5% surpassing the 1% contraction in 2019. This indicates that more jobs will be lost, and a greater number of people will be living below the poverty level.
Click Here to Read the Article in Arabic
Shared by Other Media Outlets: Al Omah, Arab48, Alquds, Alaraby, New Lebanon, Assabeel, Raialyoum, Klyoum, Al Minasapress, Iktisatnc, Erem News, Lebeconomy Files
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As Crisis Deepens What Will Become of the Electricity Sector?
March 10, 2020- Al Iktisad Online, Beirut, Lebanon
Lebanon has been renting expensive power barges that generates portions of the electricity in Lebanon for the past 7 years. The state-owned electricity company- which is currently holding a monopoly over the sector- is working without a board of directors. Dr. Mardini explained that the absence of this board has given the subsequent ministers in the Ministry of Energy and Water unquestionable authority over the sector, while also giving leeway to waste and corruption due to the absence of a supervisory authority. He also pointed out that in this current crisis, the only way out is to abide the law 129 passed in May 2019, which allows the private sector to generate electricity and compete.
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