BEIRUT — Four years into its historic economic meltdown, Lebanon’s political elites, masters at survival, are pushing for a recovery that would sidestep tough reforms demanded by the International Monetary Fund.
Economic experts and former officials involved in designing Lebanon’s original IMF-approved recovery plan in 2020 say the political leadership and associates in the banking sector are deliberately implementing a “shadow plan” to torpedo the deal and place the burden of bailing out the financial system on ordinary Lebanese who are already impoverished by the crisis.
Carrying out the IMF reforms, which include audits of Lebanon’s long secretive central bank and other banks, would not just force the elites to bear much of the cost of repairing the financial meltdown. It would also threaten the networks of corruption, patronage and waste that allowed them to milk the system for years, experts say.
“I would have never thought that these people, despite the size of the catastrophe, would still act with so much cold blood and irresponsibility,” said Alain Bifani, a former Finance Ministry director general and an architect of the recovery plan, speaking to The Associated Press about the elite’s refusal to implement it.
A growing number of politicians are now betting that a rebounding tourism sector, remittances from Lebanese abroad, and a fledgling natural gas industry will revive the economy without reforms.
The financial meltdown has widely been blamed on the political leadership that has held power for decades — as well as top banking officials and former Central Bank Governor Riad Salameh.
Salameh, who ran the bank for 30 years until July, is under investigation on money laundering and embezzlement allegations and was slapped with sanctions two weeks ago by the United States, the United Kingdom and Canada.
For years before the crisis hit, the central bank operated what the World Bank says amounted to a Ponzi scheme. It enticed commercial banks to lend it dollars at high interest rates to stay flush with cash. The banks then attracted customers to deposit dollar savings with even higher interest rates, turning a profit.
In late 2019, the scheme collapsed when the pipeline of dollars slowed, sparking a panic and a run on the banks. The banks locked down dollar accounts, allowing depositors to withdraw only in local currency at a fraction of the market rate. The life savings of many effectively melted away.