Meeting held to update Lebanon’s creditors

BEIRUT — Deputy Prime Minister Saade Chami and Finance Minister Youssef Khalil held a video conference on Wednesday to update Lebanon’s creditors on the staff-level agreement recently signed with the International Monetary Fund (IMF).

Readers can find the accompanying presentation at the bottom of this article. 

Here’s what we know:

    • On March 7, 2020, Lebanon defaulted for the first time in its history on $1.2 billion worth of Eurobonds.

    • The video call was organized by Lazard, the financial institution retained by the Lebanese government to advise it on negotiations with creditors and the restructuring of the Eurobonds.

    • On April 7, the Lebanese government signed a staff-level agreement with the IMF for a $3 billion facility over 46 months.

    • The agreement hinges on the completion of the following prior actions: Cabinet approval of a bank restructuring strategy; Parliament approval of an appropriate emergency bank resolution legislation; initiation of a bank-by-bank assessment of the banking sector by reputable international firms; Parliament approval of a reformed bank secrecy law; completion of the audit of the Banque du Liban’s foreign asset position; cabinet approval of a medium-term fiscal and debt restructuring strategy; Parliament approval of the 2022 budget; unification of exchange rates; and, Parliament approval of a capital control and deposit withdrawal legislation.

    • The call was accompanied by a presentation which shows that the Lebanese government owes a total of $37 billion in foreign currency, of which $9 billion are unpaid interest and already matured bonds. Debt priced in Lebanese lira stands at $62 billion when converted at the official rate of LL1,507.5 per US dollar, however, the number drops to $5 billion at LL20,000 to the US dollar. Multilateral and bilateral debt is measured at $2 billion.

    • The document shows the government is estimating GDP growth to average 3.2 percent in the next four years on the back of a 60 percent contraction since 2018.

    • In the next four years, by 2026, inflation is forecasted to be back to single digit levels at 5 percent from a current reading of 96.9 percent. The current account balance will shrink in 2026 to -6 percent of GDP from -14.9 percent in 2022.

    • The government is also forecasting that debt to GDP will drop from an estimated 127 percent in 2022 to 101.5 percent in 2026. While the budget deficit will tighten to -1.9 percent of GDP from the -7.1 percent estimated for 2022.

    • The government is promising the restructuring of the financial sector, fiscal consolidation and debt sustainability, the reform of state-owned enterprises, the strengthening of the governance framework and monetary and exchange rate adjustments.

    • A recording of the call will be uploaded to the Finance Ministry’s website.

*Correction: An earlier version of this article stated that Lebanon had signed a Service Level Agreement with the IMF, when in reality it signed a staff-level agreement. The article has been updated to reflect this information.