Listen to the article

Two significant events took place last week: the release of the World Bank’s (WB) quarterly report and a speech by Saadé Chami at the USJ (Saint-Joseph University) podium. Both attempted to present potential solutions to Lebanon’s complex challenges, but the solutions did not seem feasible, as upon closer examination, they were found to consist of a mixture of perplexing positions, approximative assumptions, falsehoods, and an overwhelming sense of bad faith.

However, let’s focus on analyzing the WB report while acknowledging the second event as an uninspired imitation.

The World Bank’s latest publication, entitled “Lebanon Economic Monitor,” leaves little room for ambiguity in its findings.

But before delving into the details, it is crucial to raise two fundamental questions: First and foremost, is the report an official representation of the World Bank’s position? And secondly, can we genuinely explore alternative paths to finding a solution without succumbing to the supremacy and perceived inevitability of blind adherence to the World Bank’s precepts and its close ally, the International Monetary Fund (IMF)?

To address the first question, the report itself responds on page 4: “The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank (…) or its Board of Executive Directors. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work.” The document was crafted by a team including staff members Dima Krayem, Naji Abou Hamde, and Ibrahim Jamali, in collaboration with a group of economists. This disclaimer sheds new light on the report’s nature, far from the sacredness often attributed to UN reports.

As for the second question, a broader historical perspective can help inject nuance into the discourse. While some nations have achieved success by implementing IMF and WB recommendations, others have encountered significant obstacles and setbacks. Take Argentina for example, which finds itself in its 22nd IMF bailout plan. Several countries have opted for negotiation, selectively adopting aspects of the IMF’s recommendations while tailoring them to their specific circumstances. Conversely, other countries like Malaysia have boldly rejected the prescriptions altogether, charting their course towards economic stability and prosperity themselves. Therefore, it is imperative to move beyond blind obedience to dogmatic principles and acknowledge the multifaceted nature of economic solutions.

Let’s now delve into some intricate details of the report that have been found largely objectionable:

  • The current state of so-called insolvency within the banking sector raises some significant questions. If we are specifically referring to commercial banks, how can such a sweeping assertion be made without conducting a thorough bank-by-bank audit, as stipulated in the preliminary agreement with the IMF? Moreover, it is essential to recognize that not all banks are the same. While some may indeed be insolvent, others might be facing liquidity challenges stemming from sudden bank runs.
  • Now back to the report: let us attribute it simply to “D. Krayem et al” using the established Latin formula meaning co-authors. According to this report, the losses incurred by the banking system should be immediately and entirely borne by the bank shareholders, including the so-called “big depositors,” without any contribution from the state, even though the state is to blame for having shamelessly caused this situation.
  • This perspective offered by the World Bank stands in contrast to a recent circular issued by the BDL, which allows a five-year timeframe for banks to recover. Consequently, we are faced with two contrasting approaches: one suggests an unequivocal death sentence without any form of mitigating measures, while the other offers the possibility of revival.
  • The report highlights one of the sources of losses in the banking sector, attributing its insolvency to “substantial losses” on loans granted to the private sector. Although this is a valid observation, the report fails to delve into the origins of these losses, which can be traced back to the authorities’ decision to compel banks to accept loan repayments in foreign currency through Lollar checks or even in Lebanese pounds at a fixed rate of LBP 1,500, while deposit withdrawals were intended to be in fresh US dollars.
  • Furthermore, the report criticizes those who want to hold the state responsible for the losses. A rather laughable position. Are we expected to disregard a state debt of 35 billion dollars and 90 trillion Lebanese pounds with a simple dismissal? Or should the state be absolved of its responsibility toward the Lebanese Central Bank?
  • The report also rejects the notion of privatizing state assets and future revenues as a means to address the crisis. However, this viewpoint is deceitful. The proposal put forth by the private sector does not entail selling off these assets but rather entrusting their management to private entities to generate revenues. Currently, these assets are either mismanaged, looted, or left neglected. This initiative should be pursued regardless of the presence of a crisis.
  • Another contention raised in the report is the notion that bailing out the financial sector via public, state-owned assets amounts to distributing money from the poor (taxpayers) to the rich (depositors). This assertion is entirely made-up and absurd. The state debt, which originated from bank deposits, has served the entire population. Similarly, the subsidies provided by the BDL, sourced from deposits as well, were intended to support the most vulnerable for a period of three years (excluding smugglers, of course). Additionally, the majority of tax revenue is derived from wealthy taxpayers rather than those earning minimum wages. It is evocative of Enver Hoxha’s Albania!
  • The report also claims that banks profited by selling the Eurobonds they held to foreign funds. This statement is false. In reality, banks were compelled to sell these Eurobonds at a loss in an attempt to stabilize their balance sheets.
  • Through a clear manipulation of facts, the report wrongly identifies the beneficiaries as the financial sector, bank shareholders, and affluent depositors. These claims are not only false but also reflect a lack of good faith. The financial sector is experiencing daily losses due to both public and private loans, the devaluation of the Lebanese pound, and the return of deposits based on the rates determined by the BDL circulars. Shareholders, on the other hand, have already suffered a significant decline in the value of their shares, plummeting from 20 to 4 billion dollars. Likewise, wealthy depositors have their funds locked in banks, just like all other depositors.
  • Furthermore, the report introduces a guillotine-like term, albeit subtly, throughout D. Krayem et al’s analysis: “The population facing zombie banks.” This choice of language, reminiscent of Facebook-style rhetoric, seems out of place in a report from a UN agency, thereby undermining its credibility.

However, when one embraces absurdity, it appears that any form of behavior becomes acceptable.