All Alone, Lebanon turns to IMF to solve current debt problem

The Lebanese government released its economic reform plan. Again. This plan differs from its predecessor, the infamous Lazard plan. Immediately following its release, Finance Minister Ghazi Wazni signed a request to the IMF asking for financial assistance. All the popular talk about returning the stolen money came to a screeching halt and it’s as if the intention all along was for IMF intervention. Suddenly there’s a consensus amongst Lebanese that Lebanon either goes with an IMF program or otherwise adopts a reliable barter system. However, real-life examples show that IMF programs rarely work, and come with a price to pay. Having used up all available options, and with no country willing to sink another dime into the leaking Lebanese coffers, Lebanon is all alone, and has now turned to the IMF for its financial swan song.

The Big Leagues

The IMF is the big leagues of bankruptcy, AKA the lender of last resorts. Things have to be pretty fucked up when you get the IMF involved. A lot of broke countries went to the IMF for quick cash. Yet somehow they’re still broke. Conditions for IMF loans are so strict and require quick implementation that they end up posing a serious risk on a country’s financial health. The reality is the IMF suffocates countries with their austerity measures. They go about reform in a meticulous and calculated way. They don’t care about internal politics or catering to what’s best for a particular country over the other. When they prescribe their medicine, it’s the same dose for everybody. The effectiveness of successful economic recovery through the IMF isn’t conclusive. Yes, Lebanon suffers from poor financial policies. But it’s main misery comes from corrupt leadership. This is something the IMF doesn’t address. You really want to fix an impoverished nation, first, try getting rid of the people that impoverished it.

“Having used up all available options, and with no country willing to sink another dime into the leaking Lebanese coffers, Lebanon is all alone, and has now turned to the IMF for its financial swan song.”

Strings Attached

If you know anything about the IMF, you know they come with a political caveat. There is a non-monetary price you have to pay when working with the highly politicized IMF. Access to funds is all but guaranteed. If a country falls in line with the IMF’s political and economic beliefs then receiving financial aid money becomes easier. More popularly known as “quid pro quo”. Needless to say that is UNLIKELY to happen in Lebanon because of the proverbial elephant in the parliament. Despite the begging and pleading by the current government, many foreign entities still widely consider this a Hezbollah government, or “one color” government with that color being fuchsia yellow. While there are “experts” who will convince you Lebanon’s problems are strictly economic, that’s simply not true. In fact in this particular instance, they’re wrong. The IMF may be a financial vehicle, but the driver behind the wheel is all political. On the pendulum of Western versus Eastern politics, Lebanon, so fortunately, dangles in the middle.

Home Improvements

The IMF being painted as the only option, when it’s far from an ideal one, is sudden and strange. Especially considering that when this government was formed, the whole notion of an IMF package was dismissed. But then again you starve a person long enough, they’d be willing to swallow anything. It makes absolutely no sense to resort to the IMF in Lebanon’s current state. We first need to get our house in order. You don’t re-paint your home before fixing the leak in the plumbing.

This “salvation” government needs to start salvaging. Certain promises were made but never kept. There was, once, hope in trying to retrieve the money that was stolen. Instead the narrative in the mainstream media has, overnight, morphed into “the money is gone”. The money is never gone. It’s being KEPT. And we’d like it brought back. It shouldn’t be too difficult to do; its been done before. Bashar Al Assad was able to do it in the midst of a WAR. Mohammad Bin Salman, Crown Prince of Saudi Arabia, did it from a suite in the fucking Ritz Carlton. Even the United States government was able to claw-back every last dollar from Bernie Madoff, the infamous KING of the Ponzi Scheme. Lebanon isn’t short on “tough guys” in government, what’s stopping them from doing it?

Even till today, there is money CURRENTLY being siphoned from state coffers. The Fuel scandal that surfaced recently being one. Companies (yes plural) supposedly importing fuel into Lebanon, were actually dummy SHELL companies laundering money to tax haven countries while providing Lebanon with the lowest quality fuel. This all but validates that Lebanon isn’t a bankrupt nation; it’s a looted one. For Hassan Diab and his government this could be the perfect opportunity at fighting corruption, returning stolen funds, and gaining the respect of the people. Instead, still no actions on their part, just more un-kept promises.

“The money is never gone. It’s being kept. And we’d like it brought back.”

Learn From The Past

The reform plan in its entirety is promising. It’s definitely a first for Lebanon. The main issue comes with the IMF. Hopefully the only reason the plan mentioned the IMF is just to show other countries that Lebanon means business this time. We badly need economic reforms. But we don’t need to start selling off state assets like they’re last season’s winter collection. If the only logical reasoning, amongst Lebanese, for IMF intervention is “what other choice do we have”, well, then we’re more fucked then previously anticipated.

The underlying mechanism needed for a successful IMF bailout doesn’t exist in Lebanon. The whole idea of the IMF needs to be sidestepped. The government and the country already wasted precious time considering it as a viable option. Any IMF funds would take several long months to be approved and received. By then Lebanese will be carrying around duffle bags full of Liras to pay for basic groceries. Lebanon hit the reset button and, today, has an actual chance at building a better, sustainable economic module. But it’s not going to be by taking on more loans that we have no intention of paying back. You can’t solve a debt problem by taking on more debt. You don’t build a better future by using the same methods from your shitty past.

References:

Cover photo was taken from the policy paper “SHAKE ON IT: A FAIR IMF PACKAGE FOR LEBANON” found here http://www.thinktriangle.net/wp-content/uploads/2020/03/Triangle-Shake-On-It-A-Fair-IMF-Package-For-Lebanon.pdf

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