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Lebanon spells out ‘painful steps’ required in financial rescue plan

Feb 03

Lebanon spells out ‘painful steps’ required in financial rescue plan

The policy statement may still be amended The govt. said in the policy statement that it must quickly take “painful” steps to avoid “total collapse.”

BEIRUT: A policy statement by Lebanon’s new government calls for interest rate cuts and bank recapitalization in a rescue plan that includes “painful steps” to address a financial crisis, according to a draft seen by Reuters on Sunday.
The policy statement, on which the new government will seek a confidence vote in parliament, may still be amended. It was agreed on Saturday by a cabinet committee that will meet again on Monday to give it final approval.
The government, formed on Jan. 21 after the previous one was toppled by protests in October, warned Lebanese in the policy statement that it must quickly take “painful” steps to avoid “total collapse.”
“It is not possible for any rescue plan to succeed if we do not reduce interest rates on loans and deposits in order to revitalize the economy and lower the cost of debt,” said the statement.
Lebanon is suffering a crippling dollar shortage and has one of the world’s highest levels of public debt. It must decide quickly how to deal with a $1.2 billion Eurobond maturing in March.
The statement called international donors to provide soft loans to help meet the treasury’s financing needs, though it did not name any institutions or say how much was required.
Policy proposals included expediting a second licensing round for oil and gas exploration, appointing a new electricity sector regulator, and raising tax revenues with better collection and a progressive income tax.

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