Economic recovery and the art of absorbing reforms –

The economic organizations will meet with the prime minister next week to study the details of the economic recovery plan that they had presented to him.

The economic organizations presented last week to the designated Prime Minister, Najib Mikati, an economic recovery plan. This plan consists of establishing a balance between the demands of the International Monetary Fund (IMF) and the capacity of the local economy to absorb the impact of the reforms. It will allow the gradual restoration of the purchasing power of the Lebanese and the revival of the various sectors of the real economy, once the economy is on the road to recovery. “The economic organizations have excluded from their recovery plan all measures likely to slow down or delay an economic recovery,” Nabil Fahd, a member of the economic organizations and president of the supermarket owners’ union, tells Here Beirut. He also points out that economic organizations are proposing a customs dollar of 8,000 Lebanese pounds as a starting point, with the option of gradually increasing it in the future, if necessary. “The vital thing is to allow society in all its components to absorb the shock of the reforms, without paralyzing its means of adaptation and annihilating its purchasing power,” he specifies, stressing that the customs dollar represents only 20% of the Treasury’s income compared to at 45% VAT.

No to irification

For economic organizations, the irification of bank deposits is not a solution that is part of a dynamic recovery of the economy. This measure, it is recalled, is partially in force in the framework of the application of circular 158 of the Banque du Liban (BDL). A lirification of all deposits would lead to hyperinflation due to the increase in the money supply in circulation that it would generate (in LL), increasing the pressures on the population and commercial pressures. “Banks must resume financing the economy to facilitate business operations,” says the treasurer of the Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon (CCIB). “For three years, banks have not granted new credits in dollars for fear that they will be paid loans in pounds at a rate of 1,507.5 LL. Meanwhile, entrepreneurs obtain liquidity in pounds by withdrawing their bank deposits in dollars, since either based on circular 151 of the BDL ($1 = 8,000 LL), or at the official exchange rate ($1 = 1,507.5 LL) or through the sale of discounted bank checks in pounds,” he says.

In response to a question, Mr. Fahd keeps recalling the slowness of the mechanism of the Sayrafa exchange platform, which is not able to satisfy all the requests of the importers.

sovereign fund

The economic organizations, which are scheduled to meet again next week with the President of the Government and his work team to study the details of the plan they have presented, with supporting figures, have proposed the creation of a sovereign fund to recover bank deposits and replenish the drawers of the public treasury. A project that would have many common denominators with the one proposed by the government, it is said, according to comments by Mr. Mikati. As for the capital control bill, the economic organizations are not opposed to it as long as said control does not suffocate the margin of action of the economic agents, necessary to grease the gears of a normal economic cycle.

Parliament and legislation

In this context, the question that arises is whether the rescue of the country will be done through a private sector initiative through economic organizations. The case is interesting to follow, especially since Parliament can, even after September 1, 2022, legislate, according to a constitutional expert surveyed by Here Beirut. The Chamber of Deputies is constituted as an electoral college in anticipation of the presidential election as soon as the Head of the Legislature summons it in plenary session for the election of a President of the Republic and not before, he points out.

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