Lebanon's crisis needs a $20-$25B bailout, and time is running short
Depositors, investors say they have been kept in the dark about country's dire financial situation
Lebanon needs a $20 billion-$25 billion bailout including International Monetary Fund support to emerge from its financial crisis, former economy minister Nasser Saidi told Reuters.
Lebanon's crisis has shattered confidence in its banking system and raised investors' concerns that a default could loom for one of the world's most indebted countries, with a $1.2 billion Eurobond due in March.
Depositors and investors say they have been kept in the dark about the country's dire financial situation.
Saidi said time was running short, and that $11 billion in previously pledged support from foreign donors was now roughly half of what was needed to mount a recovery.
"The danger of the current situation is we're approaching economic collapse that can potentially reduce GDP [for 2020] by 10 per cent," Saidi said in an interview.
Economists have said 2020 is likely to register Lebanon's first economic contraction in 20 years, with some saying GDP will contract by 2 per cent.
Others have predicted a long depression unseen since independence from France in 1943 or during the 1975-90 civil war.
Lebanese companies have laid off workers and business has ground to a halt. A hard currency crunch has prompted banks to restrict access to dollars and the Lebanese pound trades a third weaker on the parallel market, driving up prices.
"Our policymakers are not wiling to recognise the depth of the problems we have... they need the courage to tell the Lebanese population that difficult times are coming," said Saidi.
Credit ratings agencies have downgraded Lebanon's sovereign rating and the ratings of its commercial banks on fears of default.
Saidi said a $20-$25 billion package could guarantee payment on some of the country's public debt, enabling it to restructure in a way that would extend maturities and reduce interest rates.
Saidi said that would need support from the IMF, World Bank and Western and Gulf states.
Hariri last month discussed the possibility of technical assistance from the IMF and World Bank, but there has been no public mention of a financial package.
Banks close over angry clients
Meanwhile, banks in a region of northern Lebanon were closed until further notice on Saturday, the National News Agency said, after lenders balked at customer anger over a liquidity crisis.
Since September banks have arbitrarily capped the amount of dollars that can be withdrawn or transferred abroad, sparking fury among customers who accuse lenders of holding their money hostage.
There is also a limit on Lebanese pound withdrawals.
Clients wanting dollars often have to stand in queues for hours to make withdrawals, only to be told bills have run out once they reach the counter.
On Saturday all banks in the northern region of Akkar were closed, the NNA said, following a call from the Association of Banks for them to shut their doors "until further notice".
On Friday, citizens entered a bank branch in the town of Halba to protest about customers being unable to withdraw enough dollars or their salaries in Lebanese pounds in full, NNA reported.
They said they would not leave until a customer - who suffered an unspecified health complaint while waiting - was given a guarantee that he would be paid in full.
The 10-hour standoff ended with the man being taken to hospital and management promising to pay him in full.
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