Although the most likely outcome for Lebanon’s $1.2 billion Eurobonds is that the government will default on its debts, as has been discussed earlier, experts believe that heading towards debt restructuring for its foreign debt will not exactly help Lebanon with its total debt.
They are proposing that Lebanon should accept the IMF’s rescue plan or risk a complete economic collapse.
Nasser Saidi, former economy minister and ex-vice governor of Lebanon’s central bank, says that the government needs about $30 billion in order to rescue the economy and an additional $25 billion to recapitalize the banking system.
“Lebanon needs external liquidity both for the balance of payments but also for the government,” Saidi explained. “That’s why the external package and the IMF reform program, which comes with all the associated reforms that we need, is so necessary.”
According to Reuters, many government officials privately believe that the IMF rescue plan is the most logical solution.
However, in order to get that rescue plan, they would need to be able to overcome the objections of Hezbollah that is said to control the government with its allies.
Hezbollah’s objection to the plan is said to be the austerity measures that the deal requires.
“The position is not towards the Fund as an international financial institution but on the terms offered to Lebanon because they will lead to a popular revolution,” Hezbollah MP Hassan Fadlallah told Reuters.
He then added: “Our position is against this type of program and not against the Fund as an organization.”
However, some analysts believe that Hezbollah will have to relent because they and their allies will be among the worst affected in an economic crisis and the IMF deal is the only way out of that outcome.
Alain Aoun, a senior member of the Christian Free Patriotic Movement party, said: “Unless the right, responsible decisions are made, there’s a big collapse coming and it’s unknown what will come out of it.
“Will it be the same Lebanon or a different Lebanon?” He said to then add, “The price for the Lebanese system will be very high, bigger than just a change of government.”
Back to MP Hassan Fadlallah, when asked about whether the IMF reforms may be the only way out of the economic crisis, he declined to answer.
For the rescue plan of the IMF for Lebanon, visit here.
