Monday, June 1, 2020
Home > General > AOUN TO ISG: LEBANON’S REFORM PROGRAM NEEDS FOREIGN FINANCIAL SUPPORT

AOUN TO ISG: LEBANON’S REFORM PROGRAM NEEDS FOREIGN FINANCIAL SUPPORT

President Michel Aoun highlighted Lebanon’s need for foreign financial support in order to carry out its reform program, during a meeting with the International Support Group for Lebanon at Baabda palace Monday.

Following is President Aoun’s address during the meeting:
“At the onset, allow me, your Excellencies, to express how saddened and sorry I am about what your peoples are going through due to the COVID-19 epidemic, knowing that you all represent countries that have been profoundly hit by the tragedy.
I would like to ask you to stand and observe a minute’s silence in memory of all the victims of this epidemic, in Lebanon and in the four corners of the world, and in tribute to the deceased of the diplomatic corps in Lebanon, the ambassador of the Philippines, Mrs. Bernardita Catalla.  

Your Excellencies,
Esteemed audience,
I welcome you, ambassadors of friendly countries that have always accompanied Lebanon in its multiple crises, to such an extent as to create in 2013 the International Support Group in view of rallying support to help Lebanon and its institutions, especially with the exacerbation of the Syrian displacement crisis. As we thank you for the interest and support you have demonstrated throughout those years, we look up to further cooperation between us.
In its last meeting in Paris in December 2019, the ISG declared the willingness of the international community to support Lebanon to overcome its financial and economic crisis, with the precondition of establishing an efficient reliable government capable of fighting corruption and implementing a fundamental bundle of economic reforms.
At the pace of popular movements, in light of the growing economic, financial and social crisis, and despite all the political obstacles and hurdles, the desired government was formed indeed at the beginning of the present year, and pledged in its Ministerial Declaration to launch a rescue emergency plan and a reform basket, to fight corruption, adopt public finance solutions with economic measures to shift from a rentier economy to a productive one. If this plan is put on track, it is likely to pull Lebanon, gradually, out of the abyss where it has been hanging.

Esteemed audience,
Lebanon was getting ready to launch a workshop to address its economic, financial and social crises when the COVID-19 epidemic hit the world, so we had to declare a state of health emergency that required general mobilization. This has curbed Lebanon’s impetus to a certain extent, aggravated its crises and added to them the health crisis. And today, as we are facing all these crises and their repercussions, we welcome any international assistance from the friends of Lebanon.
I will expose to you now the challenges that we are confronted with, the ways that we adopt in dealing with them, and the assistance that we need, hoping that you take them into account upon approaching the Lebanese situation. 

First – from an economic perspective:
Lebanon is suffering from an unprecedented crisis, characterized by a huge economic recession, a decrease in internal demand and imports, a severe shortage of foreign currencies, an increase in unemployment and poverty rates, along with an increase in prices and a devaluation of the Lebanese Pound through parallel markets, as well as a deficit in public finance entailed by decreased tax revenues.

For all these reasons, in order to stop the depletion of foreign reserves which have reached a very low level, and in an attempt to contain the budget deficit, the Lebanese State has decided on the 7th of March 2020 to suspend the payment of the due Eurobonds, and two international consultants have been appointed, one financial and the other legal, to support the government in this respect.
The Lebanese State is currently working on putting up a comprehensive financial and economic plan, within a national rescue program, aimed at correcting the deep deficiencies in the economy and addressing the distortions entailed by 30 years of wrong economic and financial policies, preceded by 15 years of destructive wars that undermined many of the economic, industrial and even humanitarian infrastructures.
Despite all urgent circumstances, this plan is about to be completed. It aims at solving the economic, financial and structural problems, restoring faith in the economy, reducing public debt, putting public finance on a sustainable track, restoring vigor and confidence to the financial sector by ensuring transparency through fiscal audit and accounting conciliation, as decided by the Council of Ministers, to unveil and redress accumulated losses, by rehabilitating credits for productive sectors, implementing reform measures to promote growth, increase productivity and enhance the competitiveness of the Lebanese economy, and correct as well the balance of payments. In parallel, a fiscal reform focuses on uprooting corruption, improving fiscal compliance, controlling waste and ensuring good management of the public sector. At all stages, the plan seeks to spare the most vulnerable categories and to promote social safety nets.
In view of the current dangerous financial situation and the tremendous economic fallout on the Lebanese, the residents and the displaced, our reform program will need foreign financial support, especially from friendly States and from the International Support Group for Lebanon, in order to back up the balance of payments and to develop our vital sectors, namely water, electricity, banks, transportation, etc. We also rely greatly on the 11 billion dollar funding pledged at the CEDRE conference, which will be mainly dedicated to investment in infrastructure projects.

Second – from a social perspective:
Social security is one of the conditions of national security. It is therefore imperative to look after all the factions of our people, especially those who suffer poverty or severe shortage of livelihood resources that ensure a minimal decent life by offering the necessary food, medical and financial aid.
The Ministry of Social Affairs has therefore put in place a contingency plan to counter the tragedies that are and will be entailed by this imminent crisis, in consultation with all concerned ministries and civil society. The plan adopts transparent criteria, responds to the needs within available public resources and helps the Lebanese families overcome the emerging crisis.

Third – from a health perspective:
The emerging COVID-19 virus has become a global pandemic that has hit all nations, claiming tens of thousands of victims at a growing pace.
In Lebanon, having swiftly taken measures and procedures has helped us curb the incidence of this epidemic, keeping it so far within a reasonable range, and we are striving to keep the increase in the number of cases within our containment capacity. We are also trying to bring our expatriates back home within the available resources.
There is no doubt that national self-sufficiency during health crises is one of the pillars of the resilience of States in such crises. By self-sufficiency I mean the availability of medical, nursing, paramedic personnel, equipments, machines and protection methods namely PPEs, masks, gloves, sanitizers, as well as the required medication.
Human resources are sufficiently available and dedicated in Lebanon, for which we are very thankful. As for equipment, tools and medication, the national industry has tried to fill some gaps, and here I can only pay tribute to the Lebanese youth who sharpened their creativity during this crisis, thus registering tentative inventions that are badly needed.
Yet, the largest part remains for import, with all the tremendous and urgent financial burdens that it thrusts upon us.

Fourth – the Syrian displacement crisis:
The crisis of the Syrian displaced still weighs heavily upon the Lebanese socioeconomic reality for years. I have already addressed the international community repeatedly to explain its negative repercussions on Lebanon, and call for the safe return of the displaced to their country.
Today, with the imminent danger of the epidemic outbreak of COVID-19, and the increase of this danger at the doors of both displaced and refugee camps, our heavily burdened Lebanon has addressed the international community, once more to remind it of its responsibilities towards this humanitarian crisis. It has also turned to the UN organizations, agencies and programs to provide prevention and medical care in camps and ensure the necessary assistance for those living there, through the plan put up by the Lebanese State and not separate from it.

Excellencies,
A few days ago, UN Secretary-General has qualified the COVID-19 pandemic as the worst global crisis since the end of World War II. He had also previously qualified the Syrian Displacement crisis as the worst humanitarian crisis since World War II.
Today, Lebanon cumulates, on its soil, the burden of the largest and worst two crises that have hit the world for seventy-five years. If the COVID-19 is a bad fate that affected most of the countries and of which we have had our share, we have been bearing, alone, the displacement crisis which has cost us more than 25 billion dollars, as per the recognition of international institutions, with no solution looming in the foreseeable future.

Your Excellencies, 
Esteemed audience,
The world after COVID-19 will not be the same as before. It will be scarred with human wounds and exhausted by economic repercussions. So will the world of economic and financial brutality, the world of “I am strong then I am right” remain in place? Or will the suffering that has forged it turn it into a more humane and more solidary world? 

Our hope is that humanity will prevail.” 
For his part, UN Special Coordinator for Lebanon Jan Kubis said that “presentations provided in this meeting will help us understand the government’s vision, strategies, and objectives but also gaps and challenges in its efforts to find a way out of unprecedented crises with deep negative implications on peoples’ well-being and future, Lebanon’s stability and security, if not addressed quickly in a timely, comprehensive, effective, and credible way.”

“They will help us understand in which priority areas Lebanon needs increased mobilization of the necessary support and assistance to overcome this period of existential crisis now heavily compounded by the COVID-19 global pandemic,” he continued.

“The COVID-19 outbreak represents an unprecedented challenge for the country as it compounds issues the country has already been struggling with prior to the health emergency: macro-economic vulnerabilities, lack of liquidity and debt sustainability, weak institutions and public services and systems, deepest economic, social, and financial crisis in the recent history; increasing social tensions,” he added.

“The United Nations welcome the steps taken by Lebanon so far to start addressing the crisis and its impact on the population. We further encourage in particular the efforts to ensure all population groups across the country can have access to testing and treatment through the network of hospitals designated for the response,” he said.

“The health response needs to be coherent and unified under the oversight of the
Government of Lebanon and offer the same level of services to all patients, regardless of their legal status and nationality,” he stressed.

“In support of the government efforts, the UN is strengthening the engagement with communities, to provide evidence-based guidance about COVID-19 prevention, mitigation and care, to continue delivering critical assistance and services to most vulnerable communities, including primary health care, protection, shelter and sanitation,” Kubis indicated.

“The UN is preparing a COVID-19 funding appeal, to be issued this week, outlining the key priority areas of UN and partners to support the national COVID-19 response. The appeal is divided into four priority areas: 1. Supporting the preparedness and response capacity of the Lebanese health system in coping with COVID-19 outbreak; 2. Strengthening the engagement and communication with communities, and support for good hygiene practice; 3. Continue to deliver critical assistance and services to most vulnerable communities affected by the Syria crisis, as foreseen in the Lebanon Crisis Response Plan (LCRP); and 4. Expend support to vulnerable population groups not covered under the LCRP and in need of protection and humanitarian assistance due to the combined impact of previous socio-economic crisis and COVID-19,” he explained.

“For the UN, the situation around Syrian but also Palestinian refugees remains a priority,” he underlined.

“UNHCR and UNRWA are working on specific plans to cater for population living in overcrowded locations, i.e. camps and informal tent settlements. This includes provision for dedicated quarantine areas, which can also be repurposed as isolation places for patients with mild symptoms,” he said.

“The UN with the WB and other international partners work closely with the government on social safety net and on mobilizing support for the government in its efforts to mitigate existing and new vulnerabilities, including the socio-economic impact of COVID-19,” he added.

“The United Nations and partners are refocusing their work to best support the Government of Lebanon and the people of Lebanon in the current circumstances. Now is the time for collective and coordinated engagement,” he underscored.

“In conclusion, I would like to emphasize solidarity and commitment of the UN, of key members of the international community to support Lebanon and its people, its development, unity, security, and stability,” he concluded.
PM Diab, in turn, delivered the following word:
“It is my pleasure to also welcome you today in the Presidential palace. In the past 54 days, my government started a wide range of policies and measures to cope with several crises. Indeed, we have the enormous task of dealing with the legacies of the past, which led to:
1-     the current economic crisis, massively impacting growth and employment;
2-     a financial crisis with very wide current account and fiscal deficits;
3-     a soaring public and private debt; and
4-     a currency crisis that is severely limiting depositors’ access to their hard-earned money. 
Due to this “perfect storm”, the Lebanese went to the streets on October 2019 calling for the end of “corruption”, “bad management” and lack of transparency. I said from day one that I heard their complaints and that I will act accordingly. As if the situation was not already extremely complex, the Covid-19 pandemic added further financial, economic, social and health problems.
Mr. President, Excellences, ladies and gentlemen,
The tremendous challenges that we are facing will by no means discourage my government to properly assess the situation and act forcefully to gradually secure a bright future for the Lebanese people, especially that they will have to go through very difficult times until the proper reforms are implemented. My government, assisted by experts, is finalizing a full-fledged plan that deals with economic, financial, currency, social, and governance reforms that are badly needed. We know what should be done and we have the will to do it. It is just not acceptable to inflict hardship on the Lebanese population without giving them the best options for a prompt reboot of the economy, and for the possibility to recover at least a big share of their losses. It would be unfair to see our population suffer without having a serious program that provides hope, hold bad actors accountable, and seek rigorously recovery of “stolen assets” and money.
Within those 54 days, my government had to take the very historical difficult decision of suspending the payment of the Eurobonds, after lengthy and complicated assessments of the various options, and I am somehow glad that we positioned ourselves on a good faith negotiation track, and that all of you expressed your support to this wise step.    After this important move, we have chosen our financial and legal advisors and started working around the clock with them on various fronts. My government also spent long hours studying a big number of options to exit the crises as quickly and as fairly as possible. We came to the conclusion that Lebanon needed to restructure its debt in both currencies US Dollars and Lebanese pounds to be able to reach sustainable levels of debt to GDP in the coming years, such a ratio that would include all external financial support, as wel as the CEDRE pledged funds. We also pledge to undergo a full program to “promote” the reshaping of the banking sector and  the central bank’s balance sheet.     The summary is based on the thorough analysis that my government and its team of advisors and experts conducted with regards to the losses that have accumulated over the years in the system. Let me also highlight the fact that His Excellency President Aoun and my government decided to perform an audit of the central bank’s accounts to make good on our promise of transparency and strengthen our negotiating position in this difficult period of Lebanon’s history.
My government also engaged with international institutions and gathered support from them to face the various crises. In this regard, we formed joined teams with the World Bank to assess the monetary and financial situation, as well as the social, the fiscal, and the economic matters. I take the opportunity to thank the WorldBank’s team for its impressive availability and readiness to help. As for the IMF, we had a visiting mission which triggered a constructive dialogue, followed by well-focused technical support issues, including capital control mechanism, following my conversation with Managing Director Georgieva. Accordingly, we will soon ask our multilateral counterparts to react to Lebanon’s plan to bridge gaps between our positions. The Ministry of Finance is also talking to all our multilateral and bilateral partners on a regular basis to update them on current matters and listen to their comments. 
Excellences, Ladies and Gentlemen,
My government’s plan will be available soon, which we are currently finalizing. We have been working relentlessly to find the right balance between what is fair and humane to our population and what is acceptable on the framework of the international community.                       No doubt you have interest in Lebanon, and Lebanon needs your support, especially that we have a large gap to fill. We are committed to fill it as much as possible through our reforms’ agenda and through the recovery of ill-gotten assets, and we are hoping that you will support us accordingly with the proper level of external funds, despite the very difficult international situation. We came a long way in terms of convincing the Lebanese that tough choices are needed in various regards, and it would be fair in return to hope for your support in thinking outside the box to find ways that would reduce the hardship of a population that has been suffering for nearly half a century.
Finally, I would like to emphasize that our government will deal with the Lebanese people and yourselves with high levels of transparency. We have already showed a great deal of seriousness and clarity in assessing our situation, as shown in the investors’ conference held by the ministry of Finance, for which we received very positive feedback, mainly for the accuracy of the diagnostic. We will continue to tell the Lebanese the truth as part of our legitimacy, and rely on their support despite the difficult short period of time ahead, and we will rely on your capacity of mobilization to support us at the boards of the institutions, in allocating financial resources, supporting our quest for the recovery of Lebanon’s assets, and for your positive feedback throughout the reform process in order to bring Lebanon back to sustainable growth and prosperity in a stable context and on the shortest possible period of time. out of the total reforms pledged by my government during the first 100 days, 57% are now ready for voting in the Parliament.
Thank you.” 

Source: National News Agency