Lebanon's best-case scenario: 1/ A "potential" program with the IMF would allow Lebanon to get up to 245% of its IMF quota of $861M--or about $2.1B. Lebanon can request exceptional access, but this is unlikely given its weak governing institutions and poor reform track record.
2/ Therefore, the feasible envelope of external financial assistance (incl. CEDRE funds) is likely to be around $13.1B, which is obviously much smaller than the estimated financial-sector losses and recap needs, let alone other needs for assistance (Port reconstruction, etc.)
Apr 7, 2021 • 4 tweets • 1 min read
This doesn't work for many reasons, including that the market now knows the gov might attempt a buyback. To the extent that the market is forward-looking, Leb won't gain from buybacks. Also:
1) The market would see the purchases as a +ve signal and the price of bonds would rise.
2) Use of scarce funds to buy back and retire some of the debt will increase the price of the remaining debt and make a future restructuring more expensive.
3) Experience of debt restructurings in last 20 years teaches that what works are exchange offers, not buybacks.
