No magic wand to fix Lebanon crisis: new PM

Lebanon
Lebanese President Michel Aoun meets with Lebanese Prime Minister Najib Mikati and Lebanese Speaker of Parliament Nabih Beri at Rashtrapati Bhavan in Babada
Lebanese President Michel Aoun meets with Lebanese Prime Minister Najib Mikati and Lebanese Speaker of Parliament Nabih Beri at the Rashtrapati Bhavan in Babada, Lebanon on September 13, 2021. Handout via Dalti Nohra / Reuters

September 13, 2021

by Maha L Dahan

BEIRUT (Reuters) – Lebanon’s new prime minister Najib Mikati, who took office last week while promising to revive IMF talks to unlock aid, said on Monday that he was losing his way to deal with the worst economic downturn in history. There was no time and there was no easy way out.

The new government, formed after more than a year of political stalemate, finally met for the first time on Monday, replacing a caretaker administration that had left after a massive explosion in Beirut last year.

Mikati told the cabinet that meeting the expectations of the people would require willpower, determination and planning.

“It is true that we do not have a magic wand. The situation is very difficult,” the billionaire-turned-politician, according to a statement.

He vowed to work harder to address fuel and medicine shortages, supplies of which have dried up as the country’s hard currency reserves dependent on imports are depleted.

Lebanon hopes the new administration will eventually pave a way out of the crisis that has plunged the currency by nearly 90% since late 2019 and forced three-quarters of the population into poverty.

Western governments, including the United States and France, have welcomed the formation of the cabinet, while urging it to quickly implement reforms that international lenders have demanded before credit flows.

“We need the help of the IMF, the World Bank, regional and international funds,” President Michel Aoun, who approved the new government after months of bargaining, told the cabinet. “What is needed are immediate, decisive steps to begin reform.”

Mikati had earlier said that resuming IMF talks would be a priority. On Friday, he said divisive politics should be put aside and he cannot go to IMF talks if he faces opposition at home.

In a boost to the government, the finance ministry said Lebanon would receive a total of $1.135 billion in IMF Special Drawing Rights (SDRs), up from the $860 million expected as part of the IMF’s general allocation.

The ministry said that in addition to the $860 million from 2021, this amount also includes $275 million dating from 2009, the amount will be deposited with the central bank on September 16.

IMF talks broke down last summer with politicians and banks over a dispute over the scale of the large losses mapped by a government financial recovery plan that the fund backed. Aun urged the government to incorporate that fiscal reform plan into its policy programme, as well as the reforms set out by a French roadmap last year.

The previous government failed to implement the structural reforms donors have urged for years, including measures to address the state’s corruption and ruin at the root of the crisis.

(Written by Tom Perry; Editing by Peter Graff)

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