|Beirut should call in the IMF
|Top banker says cabinet needs help with reform
The Lebanese government should seek the help of the International Monetary Fund (IMF) to ensure that the economic reform plan is implemented, the president of the Association of Banks (ABL) in Lebanon said on Wednesday.
Francois Bassil also stressed that Lebanese banks were willing to participate in any privatization program through partnership or financing.
The head of the ABL warned against any new taxes and argued that cutting waste and restructuring Electricite du Liban (EDL) should be among the country's top priorities.
"I don't see any problem if the IMF supervised the implementation of the draft economic reform. We can't afford to miss the chance of cutting the budget deficit as we did in the past," Bassil told The Daily Star.
The IMF has provided technical assistance to Lebanon so far.
The government of Prime Minister Fouad Siniora presented highlights of the five-year draft program to the Cabinet this month but critics say that the blueprint lacks clarity. The plan calls for higher taxes, lower spending, reducing waste, privatization and radical reforms of all government departments.
Siniora and his team believe that the ratio of public debt to GDP will fall from 183 percent to 135 percent in the next five years if the plan is adopted.
Bassil's call was echoed by US Ambassador Jeffrey Feltman, who urged the government to seek IMF help.
"The Paris II reform plan failed because there was no one to follow it up," he said. "The IMF can be very instrumental in enforcing the plan," Bassil said.
Under Paris II, late former Prime Minister Rafik Hariri persuaded donor states to raise $2.5 billion in soft loans to reduce Lebanon's debt-servicing costs in 2002. But Hariri's supporters accuse President Emile Lahoud of torpedoing reform efforts at that time.
"If we'd carried out the reforms at that time, the public debt would have been less than $20 billion now," Bassil said.
He denied, however, that Lahoud's removal from office would facilitate reforms.
And in any event, he added, "removing Lahoud is not feasible now because those calling for his removal do not have enough votes in the Parliament to reduce his presidential term."
He argued that the government should coexist with Lahoud for the benefit of the country, adding that Siniora should push ahead with reforms even if the president objects.
Commenting on the blueprint, Bassil said that in general he supports the reform points but vehemently opposes any new taxes: "Taxes are not the solution. What we need now is to address all the problems in public departments. One thing we should start with is EDL."
He added that with the economy in its current state, the Lebanese are in no position to pay higher taxes.
Bassil also warned that piecemeal solutions would not help EDL, adding that the government should consider granting concessions to private investors to manage and operate the utility's power plants.
"Let the private sector make all the necessary investments in electricity and in return the government can collect taxes from these companies," he said.
EDL has been draining government coffers for 10 years due to mismanagement, poor bill collection, the high cost of fuel oil and a lack of investments in its facilities. Finance Minister Jihad Azour says EDL costs the government close to $1 billion a year - between 3 and 4 percent of GDP.
"The EDL file should be closed quickly because the government cannot continue to finance electricity forever," Bassil said.
He said the government needed to grow the economy by 8 percent a year to reduce the public debt, arguing that this could not be accomplished in the absence of radical reforms.
For example, he said, "if the government laid off redundant staff ... and closed all the departments that drain the resources of the Treasury, there would be no need for more taxes."
Bassil said banks were interested in privatization: "We can be partners in any privatization or even finance the deal. But all this must be done in a transparent manner."
He also ruled out the banks' offering the state Treasury bills or Eurobonds at zero interest.
"We agreed to offer $4 billion in T-bills with zero percent interest to the government four years ago," he said, "but we have no intention of repeating this."
The Daily Star