:27/3/2020 H.E Dr. Ghazi Waznis speech during the investor - - PDF document

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ﻭ ﺓﺭﺍﺯ ﺔﻴﻟﺎﻤﻟﺍ- ﺢﻠﺼﻟﺍ ﺽﺎﻳﺭ - ﺕﻭﺮﻴﺑ– ﻥﺎﻨﺒﻟ ﻒﺗﺎﻫ :956000-01 ﻢﺴﻘﻣ :1605 – ﺲﻛﺎﻓ :982189 -01 ﻲﻧﻭﺮﺘﻜﻟﻹﺍ ﺪﻳﺮﺒﻟﺍ: mediaoffice@finance.gov.lb

:ﺦﻳﺭﺎﺘﻟﺍ27/3/2020

H.E Dr. Ghazi Wazni’s speech during the investor presentation held by the Ministry of Finance

“Good day to everyone who registered for this presentation and thank you

for participating in this webcast. The current exceptional circumstances of the Covid-19 crisis prevent us to interact normally. However, today’s system allows participants to ask questions in writing throughout the

• presentation. Do not hesitate to post your questions. A follow-up Questions

& Answers document will be prepared on the basis of the questions received and will be made available on the Ministry of Finance website. The Lebanese Government I represent came to office about a month ago amidst an unprecedented crisis for Lebanon. Prime Minster Diab addressed the nation on 7 March 2020 affirming the commitment of this Government to guide Lebanon and Lebanese people out of this crisis towards a new sound, robust and fair economic and social model. To that end, the government has committed to develop a comprehensive recovery plan and engage into required structural reforms. In view of the critical level of available foreign currency at the Central Bank, the government took the difficult but necessary conservatory measure to withhold the coupon and principal payments on its Eurobond due on 9 March 2020. This decision and the subsequent one taken at the beginning of the week to withhold all payments on Lebanon Eurobonds is driven by the necessity to allocate all available foreign currency to the payment of priority import This presentation intends to provide our creditors with

 a detailed understanding of the depth and width of the

crisis Lebanon is facing

 an overview of the Government’s recovery plan, and  the objectives of the envisaged public debt restructuring

Over recent years, the Lebanese economic model consisted in financing the chronic external imbalance of our economy (for instance in our energy sector) by attracting dollar inflows at a very high cost through the balance sheets of commercial banks and BdL. This spurred the growth of our banking sector with a size rapidly surpassing more and more what was needed to support the real economy This in turn created ever mounting pressures on the government budget with public debt skyrocketing and essentially financing the constant need of our economy for dollar inflows. This headlong rush eventually went too far and the confidence bubble has now burst with external capital flows drying up, leading to the unprecedented multi-faceted crisis Lebanon is facing:

 a FX liquidity crisis, increasing depreciation of the

parallel exchange rate, inflation on the rise, growth contraction, leading to the deterioration of social conditions, ever mounting pressure of the unsustainability of our current levels of debt, and an

• versized banking sector [, which has de facto become

insolvent]. The Lebanese economic model is therefore broken and necessitates an urgent complete overhaul with a recovery plan enabling Lebanon to start anew. Lebanon’s comprehensive recovery plan needs to tackle all the imbalances I mentioned. It covers 4 main pillars that will be detailed during the presentation:

 An in-depth banking sector reform encompassing both

commercial banks and the BdL targeted at reshaping the

sector in line with the support needed for the development of the productive economy.

 A fiscal reform plan targeted at generated reasonable

primary surplus over the medium to long term

 Ambitious structural reforms targeted at enhancing

growth notably through the development of the productive economy and investment to rebuild infrastructure.

 A full restructuring of the government debt – both

Lebanese pound and dollar denominated debt – targeted at durably alleviating its weight on the budget and regaining normalized borrowing capacity. As you can imagine, this government has a full agenda over the coming months to design and implement its comprehensive recovery plan, and conduct its public debt restructuring. Our aim is to finalize this ambitious turnaround agenda before yearend 2020. To that end, this government commits to engage into transparent and good faith discussions with Lebanon’s private creditors in order to find a credible and sustainable solution to Lebanon’s structural debt problem”. ﻲﻣﻼﻋﻹﺍ ﺐﺘﻜﻤﻟﺍ