Draft of policy statement aims to reduce interest rates. Protecting small depositors and managing non-performing loans

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Draft of policy statement
aims to reduce interest rates

Protecting small depositors

and managing non-performing loans

A 17-page draft of the proposed government policy statement includes reducing interest rates and recapitalizing banks. The plan comprises taking painful steps to escape a deep financial crisis.

The policy statement carries measures coupled with three time frames: 100 days from obtaining Parliament confidence, within one year, and over a three-year period.

It urged quick action to avoid a “total collapse that will be difficult, if not nearly impossible, to get out of.” It said the steps would be painful but that the Lebanese would “come to know one day that it was necessary.”

The policy statement said the banking system could be stabilized by recapitalizing and dealing with a growing number of non-performing loans.

“We adhere to the reforms contained in the paper endorsed at the CEDRE Conference, including the former government’s ‘Vision for Stability, Growth, and Job Opportunities’, for financial, structural, and sectoral reforms,” said the statement.

The government is pledging to drastically reduce subsidies to Electricité du Liban, in parallel with the implementation of the electricity plan.

It intends to approve the strategy for the water and wastewater sectors as a prelude to start implementing the projects listed therein.

According to the policy statement, the government will call on international partners to provide assistance through soft loans and by helping the Treasury meet its financing needs.

The statement said that for the rescue plan to succeed, interest rates should be reduced on loans and deposits in order to revitalize the economy and lower the cost of debt.

It has also pledged to protect depositors with small balances in bank accounts.

The Cabinet will fast-track a national strategy to fight corruption, and will abolish banking secrecy and immunity for public sector employees. It also said illegal transfers of funds abroad since October 17 will be investigated.

Other proposals include fast-tracking a second round of licensing of oil and gas exploration.

The government intends to appoint members of electricity and telecom regulatory agencies, renew the terms of the members of the Petroleum Administration or appoint new ones, and name vice governors of the Central Bank.

The government also intends to deploy efforts to improve tax collection and apply a unified progressive income tax.

The policy statement, which may still be amended today (Monday), will form the basis of a confidence vote in Parliament.

Draft policy statement

Date Posted: Feb 03, 2020