A Longer #Threade I observed the last weeks
#Lebanon #IWF #China #Beirut #LebanonProtests #Financialcrise #bankruptcy
In Beirut there is hyperinflation, prices rose by 250 percent within a month, plus corruption, coronavirus, unemployment and hunger.
#Lebanon #IWF #China #Beirut #LebanonProtests #Financialcrise #bankruptcy
In Beirut there is hyperinflation, prices rose by 250 percent within a month, plus corruption, coronavirus, unemployment and hunger.
Lebanon, long ago called "Switzerland of the Middle East", is in danger of total collapse. Only the IMF and China could help. But negotiations with the IMF have failed. Now some are relying on China as a savior in need. But whether Beijing participates in it can be doubted.
And involved in this chaos is of all things EY, the accounting firm that gave Wirecard its falsified balance sheet for years (€ 1.9 billion). In March, Lebanon was unable to pay interest on its euro bonds for the first time.
In response, the currency, which had been lashed at around 1,500 Lebanese pounds per dollar for years, crashed. It is currently unofficially traded at 8,000 Lebanese pounds a dollar.
Savers also lost 80 percent of their credit in a short period of time if they had invested it in local currency. Around $ 30 billion is needed to fill the gaps in the budget, the IMF is expected to contribute about $ 10 billion, the rest is to be paid by other donors.
But it is getting darker. Because negotiations with the IMF are not progressing. This calls for a minimum of reforms in the country riddled with corruption, in which the various political and religious groups are all trying to secure as many benefices as possible.
"The main issue is whether there is a common goal in the country, in order to then push ahead with a series of very tough but necessary measures," said IMF chief Kristalina Georgieva.
But that's not exactly what it is. The best example is the state energy supplier EDL, in which around $ 47 billion has been pumped in recent years. Still, he makes a loss of two billion a year.
A long-ago agreement with the IMF stipulates that the EDL should be controlled by an independent supervisory board. To date, however, this has not happened.
Instead, a six-member board was implemented, consisting of a Sunnis, a Shiite, a Druze, a Maronite, an Orthodox and a Catholic. This principle runs through all public areas of the country - everywhere, all population groups must be involved through official representatives.
And they do not see themselves as responsible for the country, but at most for their respective group - if at all. Most of them just do business in their own pockets. The situation became even more dramatic when a gigantic financial hole in the central bank was uncovered.
The latter apparently inflated their credit balances artificially and reduced their liabilities, approved by the auditors from Deloitte and EY - the latter have waved through Wirecard's balance sheets for years.
The size of the hole is still a matter of debate, with estimates ranging from $ 90 billion to less than half of it. But central bank chief Riad Salameh had no other idea than to defend the procedure. This was necessary to buy time for Lebanon, he said in a television speech.
But all of this leads to the fact that the last competent administrators of finance are giving up in exasperation. Henri Chaoul, one of the most important Lebanese representatives in negotiations with the IMF, also threw in the towel.
Hassan Nasrallah, head of the Islamist terrorist organization Hezbollah, without which hardly anything is possible in Lebanon, still has a supposedly saving idea. The country should welcome Chinese investors, he said on television.
Media also reported that China is interested in investing $ 12 billion in ports, railways, and energy. Due to the proximity to Syria, this is highly interesting geopolitically for the Chinese. However, the Chinese can also do the math.
And they are already experiencing that many of their foreign investments in recent years have got into trouble.
The Institute of German Business recently found in a study that those countries that are involved in Beijing's "new silk road" project have now amassed around $ 215 billion in debt.
However, a total of 29 of these countries have downgraded rating agencies in recent weeks, affecting $ 119 billion in liabilities. The largest debtor Pakistan even wobbles the rating that is currently classified as "highly speculative".
And Lebanon is even worse off, Moody’s only downgraded the country to C on Monday - a step ahead of “bankrupt” and on par with Venezuela. It is doubtful whether Beijing intends to pump billions into such a country so that the elites can keep their benefices.
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