To avoid clashes between participants and to ensure social distancing, the policy fair took place in a large, spacious meeting room. Political parties’ stands were on the left side of the meeting room, while protesters’ stands were located on the right. A big space was intentionally left empty in the middle to create enough distance between the 2 groups and a stage was installed in this area. The stage had stairs, 1 to the right giving access and exit to protestors, and 1 to the right for political parties. For every paper produced, 1 or 2 representatives would take the stage and pitched the policy proposition. Groups alternated pitches to a crowd composed of journalists and experts, then participants took their stands and discussed the reforms with the audience. 

LIMS studied the documents and explained that they date back to the infamous 2017 powerships contract. The Ministry of Energy and Water had hired a consultant to produce a bidding document with terms and conditions specifically tailored for the profile of the Turkish powership company Karadeniz. However, since no other company could meet those terms and conditions, the Tenders Department (TD) considered the tender void by Lebanese law, for lack of competition. Annoyed by the decision of the TD, the ministry asked the consultant to modify the bidding document in a way to allow more than 1 company to qualify, before reselecting the chosen Turkish company. Once again, changing the bidding document after the bids had been received constitutes a legal breach, which led the TD to repeal the tender results once again. Having lost the battle, the Ministry of Energy and Water resorted to a smear campaign against Dr. Ellieh hoping to use it against him in future tenders. 

For LIMS, the need for Dr. Ellieh to come forward in a press conference reveals that official accountability mechanisms are inefficient and inactive. Now that the documents are out in the public space, the judiciary is responsible for carrying out actions and prosecuting those involved in the scandal, as well as to put an end to such legal abuses. LIMS also suspected that the push to replace the Tenders Department (TD) with a new entity called the “Public Procurement Authority” is due to the unbending commitment of the TD to respect the law. Some policy makers are hoping to appoint a more obedient director for this new entity.

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LIMS has joined Professor Hanke in calling for the immediate adoption of a currency board to save the economy. A currency board is a monetary institution–or a set of laws governing a central bank–that issues a domestic currency backed 100% with anchor foreign currency reserves. Establishing such a system would end the discretionary monetary policy that caused the inflation and the currency crisis in Lebanon.

Asked about the reasons of the fluctuations of the Lebanese pounds, LIMS explained that the short term volatility should be separated from the long term trend. In the short run, positive developments in forming a new government, and optimism about the French initiative may lead to slight appreciation. In the long run however, for a receding economy like Lebanon, a dramatic increase in the total money supply coupled with shrinking foreign currency reserves and loss of confidence make hyperinflation and devaluation the only projected outcome. The social cost is immense since at least half of Lebanese citizens now fall below the poverty line, given their incomes are denominated in the local currency. 

A currency board is more urgent today as the formation of a new government has hit a stalemate, and consequently, negotiations with the International Monetary Fund over a bailout. With the Lebanese pound soaring to 8,500 to the dollar in the real market, the exchange rate could well surpass 56,000 LBP to the dollar in 2021, if no meaningful change occurs, according to a study by Bank of America. Professor Hanke remains shocked to watch Lebanon’s politicians mull over reforms while the country slides into further economic chaos. 

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While wasting reserves on failed government subsidies, the central bank issued Circular 154 that asked banks to convince clients, who transferred more than $500,000 abroad, to repatriate 15% of the transferred sums. The circular also requested banks to persuade large account holders to convert one third of their deposits into capital. LIMS expects depositors to turn a blind eye to this request for a voluntary bail-in, especially when they see how dollar reserves are being wasted. 

LIMS sees the currency board as a gateway out of the crisis, and an opportunity to halt the currency devaluation, along with attracting investments and hard currencies. Any delay in adopting it increases the losses, as the GDP drops, the reserves dwindle down further, and the exchange rate continues its death spiral. Banks would probably still need to restructure under a currency board, but their losses would be lower, making the process easier. 

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