1/ I have been postponing writing about the government plan for a little while, i think it is time to tackle it head on. I will try to keep it as simple as possible, my goal here is getting the message through to everyone not just the specialists.
2/ I will start with general thoughts.
The document has clearly been written by 2 distinct groups, and brought together haphazardly before it was published. The first section(well written) is financial/monetary , and the second(less so) is more economic.
The document has clearly been written by 2 distinct groups, and brought together haphazardly before it was published. The first section(well written) is financial/monetary , and the second(less so) is more economic.
3/ If you go through the document, you might be under the impression that the Banks, at the direction of BDL, gambled peoples' savings in some oil futures and recorded heavy losses when the prices plummeted.
4/ And the gvt, being lean efficient and corruption-free had to jump in to restructure the sector to prevent its total collapse.
5/ You would think that our endemic corruption levels and bloated public sector are just details that we could tackle on our way back to recovery in 20 years.
6/ You would also think that once we make the private sector pay for years of mismanagement and theft in the public sector, our economic problems would go away.
7/ You would think that what is preventing tourists from flooding our hotels is the lack of parking spaces next to the Jeita Grotto and that once we improve the lighting in Anjar we would need to increase the size of our airport to cope.
8/ Now let me delve a bit deeper . I will not go into the details of the financial analysis (check @AzarsTweets who unearthed every issue ), but i will explain in broad terms what they meant.
@AzarsTweets 9/ The gvt is simply saying that they cannot pay their dues, neither to the banks nor to BDL. And therefore both would need to write-off colossal numbers off their balance sheets.
@AzarsTweets 10/ To do so, bank shareholders (those who have pointy tails as it seems) will see their equities wiped out, but that would not be enough and so they'll proceed to a bail-in by large depositors. Then we go into a mumbo-jumbo of how those depositors will be compensated.
@AzarsTweets 11/ It also expects further participation from the shareholders (those same ones stripped of all their equities) and even expect the creation of 5 new banks with fresh USD. I am sure they have the investors all queuing in the waiting room
@AzarsTweets 12/ Capital controls would be lifted by 2021, which would create a $9bn (only) new hole (according to the crystal ball they seem to be using).
@AzarsTweets 13/ Which would raise our needs in hard currency when we are asking for the multilaterals to finance our welfare programs to prevent a calamity. Go figure that: please lend us money,we need to pay our depositors else the poor guys who have no deposits are going hungry.
@AzarsTweets 14/ They expect real GDP to drop to $26bn and then gradually recover to $33bn in 2024 because of deval. They also expect the BOP deficit to drop in 2020 because of "reduced consumption" (read poverty) and actually increase in 2024 (offset by services, more on that later)
@AzarsTweets 15/ In a nutshell, this is a bankruptcy proceeding, not a recovery plan. You don't recover to $33bn after 4 years. By that time the population would be suicidal and most of the private sector would relocate to another country.
@AzarsTweets 16/ The economic plan, which is placed in the annex, is underwhelming (stay polite, stay polite... ) no overarching plan, no grand vision and most importantly no implementation before 2021 (not sure what sectors they will still have by then to improve) .
@AzarsTweets 17/ Throughout the document they pay lip service to tackling corruption, only stating in grandiose terms that this ailment will be dealt with.
Clearly these parts were for international consumption.
Clearly these parts were for international consumption.
@AzarsTweets 18/ I have seen the proposal by the ministry of industry and i fail to understand why it was brought to size in this document like that. It had most of what we traditionally asked for. Even if today we need much more of a plan.
@AzarsTweets 19/ What is in the gvt document is merely a paragraph with a bunch of very general steps ("Leveraging the Economic Attache and lebanese diaspora to open new markets").
@AzarsTweets 20/ It allocates $3.5bn over 4 years (21-24) as subsidized loans but fails to explain from where they will be getting those.
@AzarsTweets 21/ It pushes the $750Mn number for the funding of raw material. To those who don't know,this number comes from the target of the CEDAR OXYGEN fund which is a private initiative completely independent from the gvt.
@AzarsTweets 22/ The second part of the economic plan tackles ICT. Again plenty of broad terms no specific projects.
@AzarsTweets 23/ But one sentence is all out weird : " Not penalize companies that are copying a successful business model from abroad...." forget the bad English, but are they actually pushing for IP disregard? And they expect FDIs ?
@AzarsTweets 24/ On agriculture i will refer you to @MouhanedD who wrote a beautiful thread on that
@AzarsTweets @MouhanedD 25/ On Tourism :
It starts with an estimate that $250k investment would generate 182 jobs . so i take it that $250 millions (the rough price of a high end 5 star hotel) would be enough to absorb half the public workforce.
It starts with an estimate that $250k investment would generate 182 jobs . so i take it that $250 millions (the rough price of a high end 5 star hotel) would be enough to absorb half the public workforce.
@AzarsTweets @MouhanedD 26/ Also :"Tourism tends to accelerate reform and diversify exports...." .
It seems it can also cure COVID and HIV.
I don't know who was writing this but they should have given him/her a bit more time to review
It seems it can also cure COVID and HIV.
I don't know who was writing this but they should have given him/her a bit more time to review
@AzarsTweets @MouhanedD 27/ They propose a 5% reduction in VAT for new investments . Not sure how can something like this be implemented and controlled.
They also provide for tax deductions for donations to the sector (great plan relying on donations)
They also provide for tax deductions for donations to the sector (great plan relying on donations)
@AzarsTweets @MouhanedD 28/ Their main target is 4 mn tourists in 5 years. In comparison, Greece has a reached a yearly influx of 40 mn . For a gvt expecting a deval of around 150% , let's just say they are not expecting much in terms of recovery
@AzarsTweets @MouhanedD 29/ Again , this program has a goal : organize the bankruptcy and hold the banks responsible for it.
@AzarsTweets @MouhanedD 30/ For those who read/know me , i hold no love for the banks nor their self inflicting unacceptable behavior and i believe they should play a sizable role in shouldering the blame and eventual cost.
@AzarsTweets @MouhanedD 31/ But to single them out in this manner while barely tackling the real source of the problem, smells political rot and demagoguery.
@AzarsTweets @MouhanedD 32/ The main culprit to our situation is the public sector and the politicians behind it. We need a full dismantling of the current system, and the establishment of accountability at the highest level.
@AzarsTweets @MouhanedD 33/ The program relies heavily on the IMF, World Bank and western countries to help bridge the gap in funding.
@AzarsTweets @MouhanedD 34/ To my understanding and knowledge, none will subscribe to such a plan, and the current conditions set forth are clear : reform the public sector and gvt first and then we can help.
@AzarsTweets @MouhanedD 35/ Significant political reforms will be needed as well. We are going to ask for the multi laterals to provide a major increase to the allocated country funds we are normally able to tap unto, and do so with a backdrop of global pandemic and economic meltdown.
@AzarsTweets @MouhanedD 36/ To do so we would need a powerful partner to muster a coalition of countries that are willing and able , countries that wield significant influence in the IMF and World Bank (US - Europe)
@AzarsTweets @MouhanedD 37/ I will write 2 separate threads in the coming days. In one i will propose an alternative recovery plan (again in layman terms) , and the second will be political as we can no longer ignore the elephant in the room as it makes any recovery impossible
