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Lebanon's Request for IMF Aid Still Hampered by Hezbollah

March 27, 2020
Fatima Al-Uthman
7 min read
The Lebanese parliament is divided over the International Monetary Fund and its recommendations.
The Lebanese parliament is divided over the International Monetary Fund and its recommendations.
Hezbollah leader Hassan Nasrallah has now said the group does not in principle oppose Lebanon seeking help from the IMF.
Hezbollah leader Hassan Nasrallah has now said the group does not in principle oppose Lebanon seeking help from the IMF.
Ex-Lebanese Justice Minister Ashraf Rifi has said Lebanon is unlikely to receive any financial aid because of its political make-up and Iranian influence over decision-making.
Ex-Lebanese Justice Minister Ashraf Rifi has said Lebanon is unlikely to receive any financial aid because of its political make-up and Iranian influence over decision-making.
The maximum amount of financial support the Washington-based International Monetary Fund could provide Lebanon with is $633 million.
The maximum amount of financial support the Washington-based International Monetary Fund could provide Lebanon with is $633 million.
Lebanese MP Nadim Gemayel is among the politicians who have criticized Hezbollah's stance on the IMF
Lebanese MP Nadim Gemayel is among the politicians who have criticized Hezbollah's stance on the IMF

Lebanon has requested technical assistance from the International Monetary Fund (IMF) despite ongoing opposition from the Iran-backed Shia group Hezbollah, which has begun to show signs of inconsistency.

Hezbollah wields considerable power in Lebanon and considers IMF assistance a blatant interference in Lebanese affairs. In February the party’s Assistant Secretary General Sheikh Na'im Qasem described the IMF as a "tool of arrogance," according to Reuters, and the group has also opposed any IMF's management of the financial crisis.

Lebanese Hezbollah MP Hassan Fadlallah told Reuters in February that Hezbollah would reject the conditions of any IMF bailout program, whether imposed by the IMF or by any other third party. He clarified that Hezbollah is not against the IMF as an international financial institution, but rather against any conditions placed on Lebanon, which he claimed would lead to a "popular revolution."

But in a statement carried by local media in March, Hezbollah Secretary General Hassan Nasrallah appeared to soften the party’s stance, announcing that he did not object in principle to Lebanon's request for assistance from the IMF - provided that any support was unconditional.

Nasrallah's new position on the IMF has prompted comparison by a number of politicians to the current Iranian position. In mid-March, Iran requested a $5 billion emergency loan from the fund to manage the repercussions of the coronavirus.

The Lebanese MP Nadim Gemayel tweeted: "Hezbollah is fiercely opposed to the IMF and is demonizing it, while its guardian, Iran, is begging the IMF to give it $5 billion to fight the coronavirus!

“This is nothing but evidence that Hezbollah opposes and obstructs solutions because they could limit its hegemony. It acts in defense of its personal interests, not on principles or for the sake of the country."

In a statement issued to IranWire, Lebanese Hezbollah MP Ali el Mekdad denounced those linking the Iranian position to that of Lebanon. Calling the apparent coincidence a figment of people's imaginations, he said: "Today we are facing the coronavirus. We must confront it. Lebanon pays for membership to the IMF."

El Mekdad added that it was the duty of the IMF and the World Bank to provide assistance to countries in need, stating: "Lebanon, today, needs unconditional assistance. The issue of the coronavirus has, by chance, coincided with the Iranian request."

El Mekdad also stressed again that any IMF aid should be unconditional, stating: "Even if Russia or Iran provide conditional aid, we will not accept it."

But former Lebanese Justice Minister Major General Ashraf Rifi told IranWire that in his view, Nasrallah's change in tack was closely linked to Iran's position. He said: "It is unreasonable for Iran to seek help from the IMF while Hezbollah objects to Lebanon's request for assistance."

He added: "We all know that the IMF's assistance is conditional on improving state revenues, reducing tax evasion and financial drains, and removing control of sea, land, and air facilities."

Rifi revealed that the cessation of Iran's political grip on Lebanon is a prerequisite for a number of Western and Arab countries consenting to assist Lebanon financially. He also pointed out that Hezbollah is currently in a precarious position due to Iran’s own dire economic situation, now matched by an ongoing health crisis.

He surmised: "They [Hezbollah] link us to an issue that has nothing to do with us. It has only brought poverty to its people and it has only brought Lebanon poverty, corruption, and the collapse of the economy and living standards."

 

Lebanon’s Economic Crisis

Lebanon is the third most indebted nation in the world, with a 152 percent debt to GDP ratio. At the beginning of February the country submitted its official request for technical assistance to the IMF in order to develop a debt restructuring plan, in light of the declining possibility of Lebanon being able to pay its sovereign bonds in foreign currency, known as Eurobonds.

At the same time an IMF delegation visited Lebanon and held meetings with the government and relevant ministers, which concluded on Sunday, February 23. During these talks a draft agreement was drawn up to address the economic crisis and support Lebanon out of its current predicament.

Economist Dr. Ghasan Abdul Qadir told IranWire: "The current crisis that Lebanon is witnessing is the result of the economic policies pursued by the country and the final consequences of the civil war, from 1990 until today. The IMF has emerged as a possible solution to the Lebanese economic crisis and a way to obtain specific financial assistance, whether in the form of loans, grants, or gifts."

Lebanon's share in the IMF does not exceed $633 million and as such Lebanon cannot obtain more than this amount in financial aid. Recent estimates issued by international rating agencies, most notably Fitch Ratings, have indicated that Lebanon needs more than $4 billion over the coming years to help it out of its current crisis.

The IMF has provided a "prescription" to the Lebanese government that stipulates, among other provisions, certain tax increases primarily affecting VAT. Tax levied on certain luxury goods could be hiked up to almost 15 percent, which could secure up to $2 billion in additional revenue for the Lebanese treasury.

Abdul Qadir added that the IMF had requested the cancellation of most tax exemptions that previously existed in Lebanon, which could generate around $700 million for the treasury.

For his part, Abdul Qadir advised that imposing an additional tax on gasoline could secure around half a billion dollars in revenue, while removing subsidies provided by the Lebanese government to the electricity sector could secure another $1.5 billion. He also called for a restructuring of the Lebanese public sector, which would mean the salaries of current and retired employees could be adjusted while adding certain property taxes, stimulating a policy of privatization.

The current Lebanese government headed by Hassan Diab, Abdul Qadir claimed, has not taken a clear position regarding the IMF and the recommendations it has made. This government does not include any representatives of the anti-Hezbollah “March 14” coalition – which consists of the Future Movement, the Socialist Party, and the Lebanese Forces Party –  but is limited to the “March 8” parties that support the Iranian project: notably Hezbollah, the Amal Movement, and the Free Patriotic Movement.

Abdul Qadir further explained that IMF assistance is generally based on public sector restructuring, privatization, subsidy reduction, and increasing taxes in general. This has been implemented in other countries around the world which have received assistance from the IMF, including Turkey, Argentina, Mexico and a number of African states.

The economist also believes that the positive aspects of IMF assistance would include targeting corruption, increasing the transparency of Lebanese state transactions, deals, and financial dealings, and a reorganization of the public sector so that any wasteful or illicit spending is eradicated under the close supervision of the IMF.

But at the same time, former Justice Minister Ashraf Rifi has also ruled out the idea of Lebanon obtaining any financial aid, in light of the makeup of the regular government on the one hand, and Iranian hegemony over Lebanese decision-making on the other hand. He expressed his hope that Iran's social, economic and political grip on Lebanon would loosen with time, clarifying: "Iranian control means the Iranian regime's control, which does not concern the Iranian people, whom we regard and respect."

What is the IMF?

The IMF works to provide financial and monetary assistance to states around the world. It offers economic assistance and advice and regulations to re-correct economic policies, known as structural adjustment policies. It also works to correct payment imbalances, while operating according to a quota mechanism: a country in need of IMF assistance must also be a contributor to it, paying in to a given share or amount of money.

In accordance with the IMF's work and based on the shares that states contribute, states are entitled to obtain financial aid if needed. This comes from the IMF, which has worked with the World Bank and the International Finance Corporation (IFC) around the world for nearly seven decades.

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