Lebanon needs a financial lifeline to pull it out of its deep economic crisis.
But this week, the prospects for a bailout from the International Monetary Fund appeared to dim, after one of the country’s key interlocutors with the lender resigned, saying the Lebanese government had “no genuine will” to undertake painful reforms necessary for unlocking aid.
The acrimonious departure stems from a key element of a financial rescue plan Lebanon’s government approved on April 30.
The blueprint, which aims to secure some $20bn in foreign aid, offered a candid appraisal of how deep a hole the country’s financial sector had fallen into propping up an insolvent, corrupt state that for decades spent beyond its means.
The plan estimated financial sector losses at 241 trillion Lebanese pounds, roughly $62bn at the current parallel market exchange rate.
But in recent weeks, behind closed doors, Lebanon’s parliamentary finance and budget committee has been re-crunching the numbers and has slashed the loss estimate to 70 trillion pounds, ($18bn) Member of Parliament Nicolas Nahhas, the committee’s deputy head, said.
That is 70 percent lower than the previous figure. The committee chair, Ibrahim Kanaan, a prominent member of a large political bloc founded by President Michel Aoun, declared: “The financial truth won.”
But others see a profound defeat for Lebanon’s economy.
Henri Chaoul, a respected adviser working with Lebanon’s government in the IMF negotiations, resigned on Thursday, saying that the country’s politicians and its financial establishment “opted to dismiss the magnitude of these losses that impose themselves as an uncontestable reality”.
Economists also fear that the dramatically lowered estimate of financial-sector losses could scupper a bailout deal.
“These numbers are not going to be acceptable to the IMF, who have said publicly that their numbers are closer to the government’s,” Mike Azar, a financial adviser and former lecturer at Johns Hopkins University told Al Jazeera.
“These new numbers the political class are rallying around are effectively an end to IMF discussions. It’s sabotage of the IMF talks, there’s no two ways about that.”