Sorry guys I've been on a much needed break, but I heard the forensic auditor may end the contract. At least it's better than doing sub-par work. I only wish these challenges could've been foreseen back in July and repeated over and over in the media👇. It failed by design...
In other news, being outside of Lebanon really makes you appreciate how immature and pathetic our political culture is. I feel incredibly sad for Lebanese people. We should be enjoying nature and the arts, innovating and creating new things, raising everyone's living standards.
Instead, we spend every day on the same tired, unproductive discussions: which politician/banker said what, who upset whom, who's scamming whom. We're stagnating politically, culturally, socially, and economically. It doesn't have to be this way. Life has so much more to offer us
BTW, if the contract is ended, Govt will have paid the auditor $150k using ur money knowing we'd lose it (plus millions $ in wasted time). Who's held accountable for this predictable failure? At least some1 anticipated it & designed the contract so we don't lose the full $2.1 mn.
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1/ This is an incredible article. When people have no faith in their institutions, things that should not be leaked get leaked. It's a mix of useful information about the BDL audit and blatant political propaganda and deflection.
2/ First, one point about the leaker. This was clearly leaked from a political side. While I appreciate having this info, this type of stuff should not be leaked and spun in the media. It is unprofessional and hurts the country, and it is misleading in many respects.
3/ The fact is, the failure of the audit is the responsibility of several sides. One side designed it to fail while the other side was so focused on a narrow political objective and acted with such remarkable incompetence and is now trying to deflect blame for its incompetence.
1/ Crises like the many Lebanon faces can only be confronted by governments that can take decisive and difficult decisions. Two features of our system impede Lebanon’s ability to do this (which also explain why we keep spinning our wheels screaming about corruption & reforms):
2/
(a) Democracy by consensus among 6-7 competing political factions (mini-govts) that makes domestic politics similar to relations between independent states (i.e., anarchic w/ no "Govt" able to execute policy) & reforms analogues to int'l treaty negotiations between them; and
3/
(b) Communities feel no security, so politics in Leb is “existential” and not “policy-oriented”, so policy is nonexistent & communities can’t hold leaders accountable for failed policies because they fear harming their sect’s security interests & relative power vs the others
1/ BDL Foreign Assets (FA) decrease $9.8bn from Mar-Sept. FA includes BDL's FX loans to banks (~$8bn). Financial Sector Deposits are also down $5.6bn. We suspected the big decreases in FA was partly due to banks using their deposits at BDL to repay their loans from BDL
2/ If the full $5.6bn reduction in Financial Sector Deposits is because of its use repaying bank's FX loans from BDL, that leaves $4.2bn real reduction in FX reserves. The trade deficit was supposedly ~$3.6-4bn during this time. That leaves few hundred million dollars unexplained
3/ BDL confirmed the above (that big reductions in FA is b/c of repayment of bank FX loans). But there is no transparency, so it's rational to assume there is capital flight happening. Plus, the trade deficit itself likely contains capital flight b/c it can be easily gamed.
1/ The appointment of 3 political cronies w/ no expertise to coordinate technical & investigative work of the BDL auditors means millions of your $ deposits will be squandered, months we don’t have will be wasted, & forensic audit (with all its limitations) is fully politicized.
2/ It isn’t just the forensic audit. Remember a regular financial audit is being done at the request of IMF and donor countries. This is technical work and requires a competent technical team to coordinate and oversee. MOF is undermining future IMF negotiations & financial rescue
3/ The audits should be suspended & any forensic audit results rejected completely until a committee of independent professionals is appointed and all of the other issues we’ve raised are addressed.
1/ The fight over MOF is, I think, a much more consequential conflict than people assume.
Each side has firmly committed to a position using all its symbols of national prestige (Batrak/heads of parties vs. Qabalan/Amal/HA). They've both made it an existential issue to them.
2/ This means, in effect, that neither side is able to back down anymore without a costly loss of face or "national prestige", which would have long-term consequences on its ability to bargain in the future by showing its "firm" positions aren't so firm after all.
3/ This is the fundamental problem with and benefit of burning the bridge behind you. You force the opposing side to "take it or leave it" as you've made yourself unable to concede. But if the other side has done the same, then the result is stalemate or escalation of threats.
1/ It's interesting how much the the evolution of the French initiative can be explained using the basic game theory of conflict. Firstly, a common mistake made in analyzing Lebanese politics is that there is an organized system within which political negotiations take place.
2/ Domestic Leb politics is probably better understood using the tools we have for analyzing anarchic systems, which govern relations between States or... between gangs. It is a system without a "higher authority" to enforce agreements and comes with its own rules of the game.
3/ Why is this important? Because it means there really are no "rules" that can be enforced by the "higher authority", and the game becomes one of threats/bluffs of violence/force by the different players. In this environment, the credibility of the threats made becomes paramount