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Friday, 07 August 2020

Lebanese government approves economic rescue plan: Official source

Reuters , Thursday 30 Apr 2020
A handout picture provided by the Lebanese photo agency Dalati and Nohra on April 30, 2020 shows Pre
A handout picture provided by the Lebanese photo agency Dalati and Nohra on April 30, 2020 shows President Michel Aoun (C) heading a ministerial council at the presidential palace in Baabda, east of the capital Beirut. (AFP)
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The Lebanese government approved an economic rescue plan for digging the country out of a financial crisis seen as the biggest threat to its stability since the 1975-90 civil war, an official source said.

The plan drawn up by Prime Minister Hassan Diab's government comes as mounting hardship fuels a new wave of unrest. A protester was killed during rioting in Tripoli this week.

An early draft of the plan called it a "good basis" for any negotiations with the International Monetary Fund (IMF), widely seen as Lebanon's only way to secure desperately-needed financing. A second official source said that, now Lebanon has a plan, it must officially ask for IMF help.

The cabinet approved the plan after "minor amendments", the first official source said, adding that the question of the exchange rate was not decided on. The pound is still pegged at a rate of 1,507.5 to the dollar, even as it has slumped below 4,000 on a parallel market since October.

The finalised document was not immediately available.

The crisis is rooted in decades of state waste, corruption and bad governance that landed Lebanon with one of the world's biggest public debt burdens. Lebanon defaulted on its sovereign debt last month for the first time.

The early draft of the plan set out vast losses in the financial system, including a projected $83 billion of losses in the banking system that has helped finance the state.

The currency has shed more than half its value and savers have been shut out of their deposits since October, when countrywide protests erupted against ruling politicians. The price of consumer goods has shot up by 50% since October in the import-dependent country.

The question of how to cover the losses in the financial system has sparked a political row. The early draft called for an exceptional contribution from large depositors, leading to fierce criticism from opponents of the Diab government, notably Sunni politician Saad al-Hariri and Druze leader Walid Jumblatt.

The Diab government came to office in January with backing from the Iran-backed Shi'ite group Hezbollah, President Michel Aoun - the Christian Maronite head of state - and the Shi'ite Parliament Speaker Nabih Berri.

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