By Timour Azhari and Laila Bassam
BEIRUT (Reuters) – A series of reforms the IMF wants Lebanon to adopt before approving a financing deal for the country will largely be left to a new parliament to consider, an adviser to the prime minister said on Friday. minister, suggesting little could be done before a national election on May 15.
The IMF announced the draft financing agreement on Thursday, but said its board would not decide whether to approve it until Beirut enacts a package of reforms, including measures that factions in the power have long failed to implement.
A deal with the IMF is widely seen as the only way for Lebanon to begin to emerge from what the World Bank has described as one of the world’s worst financial meltdowns – and the deepest crisis since Lebanon’s civil war in 1975-90.
Many analysts have again expressed doubts about the ability of Lebanon’s rebel parties to deliver reforms they have long been unwilling or unable to accept, even as Lebanese leaders have welcomed the IMF deal and are committed to making it a success.
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Legislative elections are seen as another complicating factor. After the vote, a new government must be agreed – a process that usually takes several months.
Nicolas Nahhas, senior lawmaker and adviser to Prime Minister Najib Mikati, noted that there were only a few weeks left before the election and MPs were busy campaigning.
“It wasn’t supposed to be done in a few weeks and no serious person would say it should be done in that time,” he said of the reforms, adding that Parliament could eventually approve a law on the capital controls and a budget law before the vote. .
“The agreement is a kind of benchmark of what should come after the election. So after the election the parliament will start to quickly study these actions and then we will see how we go forward.”
Before the deal goes to the IMF’s board, the fund said authorities agreed to take comprehensive steps, including cabinet approval of a bank restructuring that recognizes and addresses large losses. in the sector, while protecting small depositors and limiting their use of public resources.
Lebanon’s political and financial elite has been at odds for two years over such a plan, including over the distribution of some $70 billion in losses between banks, the state and depositors.
Central bank chief Riad Salameh told Reuters he hoped the IMF’s conditions would be met, that the central bank had “cooperated and facilitated” the IMF’s mission and that the deal would “contribute to the exchange rate unification”.
Goldman Sachs said the reforms were economically and politically difficult, “but nothing more in our view than the restructuring of local banks.”
“The allocation of losses between government, bank shareholders and depositors is a politically difficult issue and unlikely to be resolved easily (or quickly), in our view,” he said in a statement. note.
The deal was a “significant step forward”, but more of a carrot “than a promise of short-term financial assistance“.
Mike Azar, an expert on Lebanon’s financial crisis, said the deal lacked details, including solutions, and would be sold to voters as a “victory when in reality it is a statement of ‘non-binding intentions accompanied by nothing tangible’.
“It is unfortunate that the IMF agreed to give the government a hollow victory just before the election.”
Donors want Beirut to address the root causes of the crisis, including state waste and corruption, before releasing aid.
The United States welcomed the deal, urging Beirut to adopt reforms. France called it an “important first step”.
Kuwait and Saudi Arabia, once a top donor to Lebanon, said on Thursday their envoys would return to Beirut, marking a thaw in relations that have been strained by influence wielded in Beirut by the government-backed Hezbollah. Iran.
Speaking after a meeting with President Michel Aoun, Patriarch Bechara Boutros Al-Rai linked the IMF deal to the return of Gulf envoys, saying the steps “complement each other”.
“It all feeds into the same place because they always said they would stand by Lebanon,” he said.
Andrew Tabler, a fellow at the Washington Institute for Near East Policy, said the two developments reflected the same thing: “Concern about a collapse of the Lebanese state is growing in the West and across the region.”
“I’m skeptical (Lebanese politicians) will take the tough choices. They usually don’t.”
(Additional reporting by Tom Perry and Enas Alshray; Writing by Tom Perry; Editing by Hugh Lawson)
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