|
|
|
|
|
Lebanese People Protest in The Streets
October 18, 2019- Sharq Awsat TV, Turkey
The Lebanese government attempted to levy a new monthly $6 tax on WhatsApp calls sparking protests across the country. Driven by the worsening economic situation, Lebanese people protested against corruption, government waste, high unemployment, inflation, shortage of dollars and scarcity of certain imported products. Dr. Patrick Mardini explained that the Lebanese people cannot afford additional taxes without sound economic reforms to stimulate the stagnating economy.
Click Here to Watch Interview 1 in Arabic |
|
|
The government’s austerity policy focused on increasing revenue through additional taxes rather than reduced spending. Despite the increase in budget deficit, the government insisted on financing large-scale projects like water dams, the telecom network among others. Dr. Mardini highlighted the importance of relieving the government of these expenses. He suggested restraining from renting power ships, ceasing the building of new dams and allowing the private sector to finance and operate these projects. This would shift the cost from the government to the private sector.
Click Here to Watch Interview 2 in Arabic |
|
|
|
The Banking Sector Pressured to Deal with Public Spending
October 20, 2019- Sharq Awsat TV, Turkey
The Lebanese people refused to further finance government spending through taxes and went to the streets. As a result, the government suggested imposing taxes on banks. Lacking the ability to attract new capital due to the worsening situation in the country and being subject to new and increased taxes, banks started losing their customers’ trust, forcing them to create capital control. Dr. Mardini explained that the pressure on the Lebanese exchange rate will increase and banks would have to transfer these costs to their clients. More importantly, he emphasized that no additional taxes on either the people or the banking sector will ensure higher tax returns for the government similar to their 2018 and 2019 attempts.
Click Here to Watch Video 1 of the Interview in Arabic |
|
|
The Lebanese economy witnessed a recession in 2019 mainly due to public monopolies of major vital sectors: EDL in electricity, Ogero in telecom, Middle East Airlines in airways, Alfa and Touch duopoly in phone services, Casino du Liban… etc. These monopolies have led to huge government expenses and decreasing revenues, thus a higher budget deficit. Dr. Mardini proposed dismantling these monopolies and opening these markets to competition in order to attract new capital, encourage economic mobility and most importantly reduce government losses in these sectors.
Click Here to Watch Video 2 of the Interview in Arabic |
|
|
In a press conference, the Lebanese Prime Minister Saad Hariri announced a plan to privatize the telecom sector as a first step toward good reforms. He promised accelerating the electricity plan and the FRSU tenders for 3 units, each at a $4 billion cost. Dr. Mardini clarified that the best solution would be to open the telecom sector to competition in order to avoid transforming a public monopoly into a private one, thus, keeping high prices on consumers. Pushing through with the electricity plan is a move in the right direction. However, the temporary solution will increase government spending and should be dropped according to Fichtner Consultancy.
Click Here to Watch Video 3 of the Interview in Arabic |
|
|
|
|
A Government Proposed Reform Paper in Response to the Protests
October 22, 2019- Sharq Awsat TV, Turkey
In response to the protests, the government proposed a new reform paper hoping it would calm the protests. According to Dr. Mardini it mixed good economic reforms with bad or contradictory ones. For example, it proposed launching a $2.6 billion project through the parliament, contradicting its decision to freeze unnecessary investment spending estimated at $1 billion in the 2019 budget. He added, the privatization of certain sectors such as telecom, casino, airlines, airport, the Beirut stock exchange and oil institutions without opening the sectors to competition keeps prices high on consumers and does not provide them with the optimal service. Allowing competition in these sectors would potentially allow consumers to benefit from cheaper tickets to Lebanon compared to neighboring Turkey, Greece or Jordan, as well as better telecom services at lower prices.
Click here to watch video 1 of the interview in Arabic |
|
|
The reform paper also suggested the banking sector to pay 50% of the public debt interest – equal to $3 billion and imposed a $1 billion tax on the sector. However, banks lack the resources to cover the 2019 budget deficit. The central bank has around $40 billion of reserves in foreign currencies, yet Moody’s reported that only 6 to $10 billion can be used to maintain the Lebanese exchange rate. Deducting $3 billion of these funds would elevate the pressure off the Lebanese pound and lead to a devaluation of the currency.
Click here to watch video 2 of the interview in Arabic |
|
|
Lebanon is the third most indebted country in the world and the electricity is responsible for 45% of it. Still, the reform paper overlooked this sector. In fact, it proposed accelerating the approval of new power plant contracts and the call for tenders as presented by the Ministry of Energy and Water. By rushing these projects, the government plans to bypass the supervisory committee represented by the tender’s department.
Click here to watch video 3 of the interview in Arabic |
|
|
Dr. Mardini stated that the solution to Lebanon’s huge deficit and debt crisis starts with reducing government spending by eliminating monopolies and opening the market to competition, as well as controlling and supervising any remaining expenses the government may have. However, parliament presented a public procurement law that eliminates any control or supervision over public projects and transactions. This law strips the tender’s department of the supervision it currently has on 5% of tenders. According to Dr. Mardini, the needed reform lies in giving more control to regulatory bodies that overlook government spending, instead of taking them away.
Click here to watch video 4 of the interview in Arabic |
|
|
|
Protestors Refuse the Prime Minister’s Reform Paper
October 22, 2019- Anadol Agency Online Magazine, Beirut, Lebanon
Despite the few good reforms in the paper, protestors remained in the streets. They refused the financial and economic policies judging them as inefficient. Even though the 2020 budget considered eliminating needless institutions and cutting ministers and MPs salaries by half, citizens’ trust in the current governing body was broken. Under such circumstances, Dr. Mardini anticipated a further deterioration of the Lebanese exchange rate which has become prevalent at currency exchange stores. Dr. Mardini explained that even salaries will lose their value since the people’s purchasing power will be reduced.
Click Here to Read the Article in Arabic
Other Media Outlets: Arabic Post, Beirut Observer, IMLebanon |
|
|
|
The Government’s Economic Reform Paper has many Flaws
October 24, 2019- Lebanon 24 Online Magazine, Beirut, Lebanon
Dr. Mardini expressed many concerns about the reform paper: (1) reducing unnecessary investment projects without specifying them, (2) forcing the banking sector to contribute to the public deficit using their $38.5 billion reserves which puts pressure on the exchange rate, (3) public private partnership that keeps monopolies instead of opening the sectors to competition (4) maintaining the temporary solution in electricity, and (5) reducing the power of supervisory bodies by issuing the public procurement law stripping the tender’s department of its power.
Click Here to Read the Article in Arabic |
|
|
|
Lebanon’s Most Needed Reforms
October 22, 2019- Al Joumhouria Newspaper, Beirut, Lebanon
After Lebanon’s protests and the government’s attempt to come up with a reform paper to satisfy peoples’ demands, Dr. Mardini specified what kind of reforms would reboot the economy: (1) opening certain sectors to competition to provide better services at lower prices, and (2) activating the role of supervisory bodies to minimize corruption. The Justice committee proposed a law in 2017 enlarging the tender’s department’s role and powers. This reform, in Dr. Mardini’s opinion, guarantees a fair competition between bidders and expanding it to include vital production sectors would spur growth without adding any costs to the Lebanese government.
Click Here to Read the Article in Arabic
Other Media Outlets: Kataeb.org |
|
|
|
The Budget Deficit Caused a Shortage of Dollar
October 29, 2019- Sharq Awsat TV, Turkey
Banks have remained closed since the onset of the protests. The demand for dollars increased and trust in the Lebanese pound was lost. People’s deposits at commercial banks were placed at the Central Bank, who in turn, invested them in 50% of the treasury bonds. Due to the increased risk of government default, people rushed to withdraw their money and the Lebanese pound dropped to 1850 LBP for US1$. Dr. Mardini retraced the increased demand for dollars to the huge government deficit.
|
|
|
|
The Dollar Crisis Affects Bread and Flour Supplies
October 13, 2019- Anadol Agency Online Magazine, Beirut, Lebanon
Mills and wheat importers reached out to authorities for a solution to the dollar crisis to continue providing the country’s needs at fixed prices. These importers pay in dollars at an exchange rate of 1630 to 1650 Lebanese Pounds to the dollar and sell their products at the official rate of 1507 LBP. Dr. Mardini clarified that Lebanon’s increased demand for foreign currencies is due to the increased government deficit which has led to the dollar crisis. The difference in exchange rates will lead to higher prices on goods such as bread and will be transferred to the central bank to cover the trade deficit of $5.39 million in 2019 using foreign currency reserves.
Click Here to Read the Article in Arabic
Other media outlets: Al Arab News, Al Jazeera, JBC News, Alquds, Raialyoum |
|
|
|
Banque Du Liban (BDL) Reserves to Cover Imports
October 16, 2019- Al Joumhouria Newspaper, Beirut, Lebanon
The change in Lebanon’s exchange rate increased the price of imported products. Merchants are now selling available products for higher prices to account for this change. Lebanon faces shortages of bread, medicine and oil derivates since they are priced by government. To avoid this scenario, the government asked the central bank to cover the $16 billion trade deficit from the $38.5 billion reserves. Dr. Mardini clarified that BDL cannot cover imports for more than 2 years and finance the government at the same time.
Click Here to Read the Article in Arabic
Other Media Outlets: Kataeb.org, Alankabout, IMLebanon, Akhbar Al Yawm, Lebanese Forces, Almada |
|
|
|
|
|
|
|
|
