The Arabic version of the article titled “Lebanon awaits deep and immediate reforms” can be accessed on the website. Scroll down for the English translation.

هرباً من Libazuela… لبنان ينتظر إصلاحات عميقة وفوريّة

Lebanon is a failed state, with an absence of the rule of law, endemic waste and corruption, growing political polarization, lack of accountability (witness the cataclysmic Port of Beirut explosion, assassinations), and mounting government violent repression of protests. Lebanon is engulfed in overlapping fiscal, debt, banking, currency and balance of payments crises, resulting in an economic depression and humanitarian crisis with general and food poverty affecting some 50% and 25%, respectively, of the population. The main pillars of Lebanon’s economy -trade and tourism, banking & finance, health and educational services- have been destroyed, if not irremediably. The economic and monetary meltdown, resulting in an 80% depreciation of the Lebanese Pound and a 130% inflation tax, is the result of the collapse of the Ponzi scheme and ‘financial engineering’ operations of the BDL along with multiple policy errors. Importantly, the dramatic events of 2019-2020 were avoidable.
There is hope through:
1. A strong government of independent, public policy experts, with extraordinary powers for a limited period;
2. Implement confidence building reform measures to sustainably cut the budget deficit, including by removing fuel, electricity and other subsidies (only 20% of which go to the poor and needy) and replacing with direct cash transfers, as part of a targeted social safety net.
3. Scrap the distortionary multiple exchange rate system and gradually move to flexible exchange rates.
4. Restructure the banking system and reform the BDL.
5. Restructure the public and BDL debts.
6. Negotiate an IMF programme and a ‘Marshall plan’ with multilateral funding from international financial institutions and Cedre conference participants, including the EU and the Gulf Cooperation Council. This would translate into financing for infrastructure, reconstruction, access to liquidity, and stabilise and revive private sector economic activity.
7. Act with the international community (including US, EU, UK, Switzerland and others) to impose personal sanctions and freezing of the assets of Lebanon’s main politicians and policy makers and regulators, as part of a Stolen Asset Recovery programme.
Without such deep and immediate policy reforms, Lebanon is heading for a lost decade, with mass migration, social and political unrest and violence. Lebanon will become “Libazuela”.