The Association of Banks in Lebanon (ABL) issues on May 1, 2020 a press release following the council of ministers’ approval of the long-awaited financial recovery plan for Lebanon. The ABL commented that it cannot endorse the government’s plan and has raised several comments as outlined below:

-         The ABL was neither consulted nor associated with the presented plan. The press release went on to say that an economy necessitates a strong banking sector capable of fulfilling its role by providing credit means to individuals and companies

-         Building blocks that are necessary for investor confidence such as an effective anti-corruption strategy are highlighted in the reform plan without providing further details, raising question marks on the timing of the implementation

-         The government’s plan assumes international financial support, particularly from the IMF and from CEDRE funds. The ABL commented that official discussions with the IMF are about to start, while the disbursement of the CEDRE funds are conditional upon the implementation of pledged reforms

-         Revenues and expenditure measures remain ambiguous and are not backed by an accurate implementation calendar

-         Some of the assumptions in the government reform plan, namely growth assumptions and fiscal consolidation measures, could be challenged namely:

• the limited impact attributed to the bold nature of the domestic debt restructuring
• the unknown impact of the global crisis from the COVID-19 pandemic

The assessment of these impacts would produce different fiscal projections

-         The plan does not tackle inflationary pressures and could lead to hyperinflation

-         The social inclusion aspect of the plan requires additional details particularly with regards to job retention, poverty alleviation, and inequalities reduction

-         The plan blames Lebanese banks for the crisis. The press release clarified that banks financed the public sector without being in the loop of how funds disbursed

The ABL noted that the current situation in Lebanon calls for a constructive dialogue, unity and solidarity, and mentioned that the ABL will continue to support the country and will keep on complying with its fiduciary duties. In addition, the ABL affirmed its readiness to cooperate with the government to reach a common agreement on a reform program that will benefit all Lebanese. It added that the ABL intends to present to the government its own plan in the near future, one that will address the current recessionary environment and will put the country on a sustainable growth path.