four-pillar recovery plan
debt restructuring process
The government will embark on a comprehensive recovery plan in parallel to debt restructuring, according to Minister of Finance Ghazi Wazni. He presented – together with ministry officials, an outline of a plan to investors in Eurobonds.
“Our aim is to finalize this ambitious turnaround agenda before the end of 2020,” Wazni said.
The plan covers four main pillars. The government will start the debt restructuring process by discussing the fundamentals in order to agree on the economic and debt outlooks. The next step will be to start the active negotiations with the restructuring parameters. The third step will involve agreeing on key financial terms such as new issuances.
The first pillar of the recovery plan consists of an in-depth reform of the banking sector including both commercial banks and the Central Bank (BDL). The aim is to reshape the sector in order to enable it to support the development of the productive economy.
Besides reforming and restructuring of banking sector, the plan includes disentangling of the links between commercial banks and BDL.
The second pillar entails fiscal reform that includes achieving a reasonable primary surplus over the medium to long term.
The fiscal reform involves reforming the electricity sector and the pension system, rationalizing current expenditure, and streamlining government institutions, improving the tax collection compliance rate, and increasing the tax burden on rent income and on privileges given on state properties.
The minister said that the third pillar involves enhancing growth by developing the productive economy and investment to rebuild the infrastructure.
The growth-enhancing structural reforms include reforming the judicial system, enacting the needed laws such as the bankruptcy law, as well as legislation on procurement and competition.
The sectoral strategy will include land reform, energy, water and waste management, education and health, support to dynamic industries and obtaining external financial support to finance high-value added infrastructure projects.
The fourth pillar involves a full restructuring of public debt in order to alleviate its burden on the budget and restore the country’s borrowing capacity.
The government will tackle both the lira and foreign currency debt. The restructuring will depend on the resources that will be available to the government and BDL’s reserves.
The bilateral and multilateral loans, which amount to $2 billion, will not be restructured.
The Treasury bills and Treasury bonds will be restructured in due course. There are around the equivalent of $57 billion in T-bills and T-bonds. The T-bills that need to be settled this year amount to the equivalent of $10.3 billion. The restructuring will depend on available lira resources and the surplus that the government will be able to achieve in the midterm.
The remaining Eurobonds due for 2020 amount to $4.58 billion. The total outstanding Eurobond value stands at $31.3 billion.
Click here to view the presentation made to investors
Reported by Shikrallah Nakhoul
Date Posted: Mar 27, 2020