Virus pandemic, oil price may hamper aid to Lebanon

BEIRUT - The impact of the coronavirus and falling oil prices may have damaged Lebanon's chances of securing aid from foreign states, the economy minister said on Tuesday, adding that IMF aid should be considered as an option alongside others.

Lebanon's debt burden is now equivalent to nearly 170 percent of its gross domestic product as it struggles with its worst financial crisis since independence in 1943. It has been unable to pay foreign currency sovereign debt for the first time and its currency has lost some 40% of its value, while dollar reserves are critically low. 

Lebanon said last week it would default on its Eurobond debt for the first time, saying that was the only way to shore up its foreign currency reserves. 

Raoul Nehme said work to draw up economic rescue plans continued despite a shutdown to curb the spread of the new virus. Major aspects of the plan, including how the state will cut the deficit and boost revenues, will probably be ready in two to three weeks' time, he said by phone. The full plan requires another two months or so, he added.

Lebanon has requested technical assistance from the IMF but not financial aid that would typically come with conditions. Some politicians have voiced concern the IMF would impose conditions Lebanon could not meet, but many analysts believe the IMF is Lebanon's only solution.

States that have helped Beirut in the past have said they will not help this time unless long-delayed reforms take place.

Nehme said it was still too early to gauge the impact of the coronavirus. But he said aid from states to which Lebanon has been looking for support "can be less significant" if they suffer their own financial problems.

"We will certainly seek the support of our friends in the Arab world but their revenues are going down drastically with the price of oil going down under $30 practically so that puts limitations on their capacity to assist us," he added.

Hezbollah softens stance on IMF

Banking experts have called for an IMF rescue package for Lebanon, saying it would secure desperately-needed international assistance and reassure creditors.

Asked if the crisis would affect access to potential IMF financial aid, Nehme said: "No that would not be affected."

"In my opinion depending on discussions with the IMF and so on, yes why not ... We cannot say we don't have this option, and we cannot say this is the only option. But it is certainly an option, it is a good one," he said.

The powerful Hezbollah, which has previously said it was against allowing the IMF to manage the crisis in Lebanon, softened its position on Friday.

Its leader, Sayyed Hassan Nasrallah, said the group was not against foreign aid even it came from the IMF as long as the terms did not harm the national interest.

"Any help within reasonable conditions, there's no problem with it in principle," Nasrallah said in a televised address. But he warned that "Lebanon must not fall under anybody's trusteeship or hand over its financial and economic administration" to outside parties.

Hezbollah had previously said it rejected conditions and "ready-made recipes" which global bodies could impose, warning against what it called "foreign guardianship" over the economy. The Shiite group is backed by Iran, whose arch foe the United States has a virtual veto on IMF decisions.

The IMF last week urged Lebanon to quickly implement reforms to stabilise the economy.

"Given the severity of economic conditions in Lebanon, it's important that the government designs and implements promptly a comprehensive package of reforms to effectively address the economic challenges and improve Lebanon's economic prospects," IMF spokesman Gerry Rice told reporters on Thursday.

While the country has not requested aid from the Washington-based crisis lender, "We stand ready... to assist the authorities in those efforts."