The Lebanese Finance Minister, Ali Hassan Khalil, said that Lebanon is “definitely not on the brink of bankruptcy,” in an exclusive interview with Al Arabiya’s Rima Maktabi.
“There is a solid banking system and reassuring precautions at the Central Bank that allows maintaining economic, financial, and monetary stability,” he said in the sit-down interview taking place in the Lebanese Ministry of Finance.
Khalil attributed the escalation of the financial economic challenge in Lebanon to a number of things; the domestic political situation, the delay in forming the cabinet, the decrease of financial flows into the country, the Syrian displacement, and the disruption of land routes between Syria and Lebanon.
Below is the full transcript of Al Arabiya’s interview with Ali Hassan Khalil:
Money and the economy are the major headline in Lebanon today. There are many rumors and media reports that Lebanon is on the brink of economic collapse, on the brink of bankruptcy. What’s the truth?
There are a number of things which in the past phase made the financial economic challenge escalate in Lebanon. One thing is the domestic political situation and the delay in forming the cabinet. Before that, there was the delay in holding the presidential elections. This is in addition to other factors linked to the region and the decrease of financial flows into Lebanon. There’s also the crisis of the Syrian displacement and the disruption of land routes between Syria and Lebanon. It’s thus a group of factors that complicated the economic and financial affair, but I can frankly and clearly say that we’re definitely not on the brink of bankruptcy. There’s strength and vitality in our system to restore its role and growth quickly. Experiences have shown this. There’s also a solid banking system and reassuring precautions at the Central Bank that allows maintaining economic, financial and monetary stability.
So there’s no economic crisis in Lebanon.
There’s an economic crisis that can be seen through the decrease of the growth rate and economic activity. However, this crisis is not insurmountable. There is a possibility to solve it. I do not think it will lead towards financial collapse especially that the government is committed and began to seriously work on a series of reforms which it included in the current budget draft and which is supposed to be discussed as soon as possible.
In general, and in headlines, what are these reforms?
There is a number of issues we discussed with international organizations and committees which helped us prepare for the Cedar Conference. These issues focus on decreasing deficit, beginning with resolving the electricity affair since it constitutes a large percentage of this deficit, around 36% of the internal deficit in Lebanon is related to the electricity crisis. The government is handling this seriously. This is in addition to reforms related to wages, retirement wages and the public debt service. There’s also the decision to take austerity measures in the budget during the next two years, measures that are studied and that are adopted via a way that does not influence growth. There is also launching investment projects in Lebanon.
The president accused the cabinet of being slow regarding economic damage. Why do you think he did so? Is the government slow or is it resolving problems that have accumulated over the years or is all this due to political bickering?
As a finance ministry, we were technically ready in the past phase and during this phase. We proposed a draft budget by the constitutional deadline on August 30, 2018, i.e. before the constitutional deadline. However, it’s important to know that political stalemate is a result of the cabinet’s absence in the past phase. Also the prime minister has to carry out a series of consultations over the measures to present them in a way that does not cause differences or divisions inside the cabinet. I think this is reasonable. I think this will save plenty of discussions inside the cabinet since all political parties will have decided their stance from the options we adopted while preparing the draft.
Allow me to speak the language of the street and the language of the ordinary Lebanese citizen who thinks that corruption is rampant within the Lebanese political category and that it’s the reason behind the deficit. Of course, in terms of financial and economic logic, corruption alone cannot lead to economic collapse. What are the measures which the government is currently taking to fight corruption that’s no longer invisible?
Personally, I do not like to use this slogan much because what’s required are practical measures which each ministry and each department implements. I think there’s a high percentage of corruption and squandering but I do not like to use this slogan to politically employ it. We must have continuous practical measures that takes us to a phase where we limit the percentage of the rampant corruption. This is one of the major issues which we are working on within the framework of reforms that I spoke about. Corruption is a basic matter.
The electricity file alone has been scandalous for Lebanon
Not just electricity but there are other matters which, realistically speaking, Lebanese citizens have the right to ask questions about. I agree with you that the general atmosphere in the country and the public opinion in the country has very weak trust in the political leadership. Hence, the measures we adopt must restore the citizens’ trust in the state and in the institutions which we all contributed to their decline at some point when we did not truly address squandering and corruption. We must execute real reforms and take measures that make citizens feel that their belonging to the state is meaningful.
Don’t your fear popular reactions as a result of austerity measures in the budget, whether these measures are imposing taxes on citizens or decreasing wages?
No new taxes will be imposed on citizens. I assure this. Also we will not change the wages or the dues of the low or middle class. On the contrary, we will improve their situation. All the measures we’re talking about are measures that will not harm these people. Therefore, the state and popular segments are supposed to be part of one battle towards taking these measures we’re talking about.
There are American sanctions on Syria and Iran so how will Lebanon deal with this when it’s in the middle of these political arguments?
In principle, we reject these punitive measures whether they’re against Iran or Syria. We think there are no realistic legal justifications for them. However, Lebanon complies with all international procedure regarding financial transactions. In the past four years, we followed all the required laws. Our banking system is committed to its ties with the correspondent banks in America and other countries. It commits to the set international standards and carries out its duties in this regard. We work with the Global Forum on Transparency in a serious manner as there’s daily work that follows up on the set legal mechanisms. However, it’s clear that there will be consequences on Lebanon such as confusion with financial procedures related to transactions with the countries you mentioned, especially Syria which due to geography it’s supposed to have broad commercial ties with Lebanon.
Or participating in reconstruction as, for example, medium sized businessmen were hoping they’d be partners in the reconstruction of Syria.
I think all the file related to the reconstruction of Syria will change with reality. I think the more we approach solidifying a political solution and stabilizing the crisis in Syria, these measures against Syria will be reconsidered. Lebanon, will one way or another, have a share in the reconstruction of Syria. This is something that Lebanon needs and that Syria needs given the geographic location and historical commercial relations between the two countries.
What does the finance minister have to say through our screen knowing that hundreds of thousands of Lebanese expats watch this channel and a large number of them deposits their money in Lebanon and there’s a rumor every day that the lira is in danger and they should withdraw their money or transfer their funds to the dollar. What are the reassurances?
I am conveying a realistic message that monetary stability in Lebanon is secured. Even if this crisis continues, we, through our banking system and our reserves, have the ability to guarantee the stability of the lira in Lebanon. We have the ability to guarantee the banking system in Lebanon, which is very advanced compared with other banking systems in the Arab world, and perhaps on the level of the world. Regarding Lebanese expats whose money is in Lebanon, they must be confident that we will maintain this stability. All the talk today in some media outlets, whose orientations and intentions are suspicious, is not accurate and completely false.
How will you deal with American sanctions on Hezbollah members?
During the past phase, there were sanctions on certain individuals and Lebanon dealt with them legally. We maintained the right of these Lebanese people to practice their commercial and financial activities normally without trespassing the principles of our ties with foreign countries between banks and correspondent banks or between the Lebanese government and foreign governments.
Will the entire Lebanese people pay the price of sanctions on Hezbollah members?
Of course there are effects but we have the ability to adapt and we have adapted with reality, and I think we managed to overcome this.
What about media reports that there will be sanctions on Parliament Speaker Nabih Berri and those close to them, are these reports accurate or not?
This matter has been finalized by the concerned American parties. The delegation that traveled to America has absolutely nothing to do with the rumors that spread. It was a delegation participating in periodic meetings with the World Bank. Their presence in Washington was a coincidence as it happened at the same time when this issue was brought up. There was a chance to directly hear from the American Treasury, the American State Department and the White House that these rumors are baseless.
Is there fear that the commitments Lebanon made during the Cedar Conference will help western countries and the international community have a foothold in Lebanon, especially that there are political parties, like Hezbollah, that are paranoid from such roles by the international community?
Let’s be clear. We’re not doing anything exceptional in Cedar. We reorganized our relations with countries and donor committees within a general framework that the government prepared. This framework includes projects that push forward the economic and developmental wheel and cover the market’s investment need in the country. Therefore, Lebanon will discuss each project one at a time. There is a commitment to maintain sovereign affairs and not letting them be impacted by these commitments especially that most of the Cedar pledges are soft loans over a long term. We are now taking as debt with high interest from global and domestic financial institutions or from international institutions according to agreements approved by the parliament. There is no change. I think there’s no reason for paranoia in general especially that we discuss each project. Of course, if the Lebanese and international commitments are fulfilled, then Cedar will help decrease the deficit in our budget via the long term loans for smaller amounts of interest. More importantly, Cedar will enhance the opportunities for investment spending in the country. Frankly speaking, the size of investment spending in the country is very limited as it does not exceed 9 percent. Therefore, what’s required from us is increasing it to create job opportunities and pump vitality into the economy hence resolving the growth issue.
Are Arab and Gulf countries partners in economic growth in Lebanon? How’s the relation with them?
Arab countries have historically stood by Lebanon during several stages when it needed them, whether by helping it via projects or providing different grants. Frankly there’s plenty of retreat which I think is tactical and has nothing to do with their perception of the relation with Lebanon, but we must bring this back.
What do you request from Arab and Gulf countries?
Lebanon currently needs economic and financial support and brotherly commitment. These countries, through their institutions which had strong ties with Lebanon, are hence supposed to restore their role strongly on the economic, financial and developmental levels.
Let’s discuss politics and specifically the defense strategy, which secures encouraging investment in Lebanon and also achieves the region’s stability. The issue pertaining to the defense strategy has not been resolved and you have not achieved any result, what’s the reason behind this delay?
The national dialogue sessions have been suspended. We know that this strategic matter that pertains to the defense strategy is supposed to be discussed within the framework of the national dialogue and we must resume the talks which were held in 2006 and in 2015 and 2016. This delay is not due to a principled stance taken by any party. All the concerned parties are ready for this discussion but let’s note that the rule which Lebanon has set, even if there are some reservations over it, guarantees this security and stability. This rule is the presence of a strong army whom the people are united around and who are willing to support it and to practice this support in decision-making posts and commitment to the Resistance as an element that helps the army be balanced with the Israeli enemy so it does not repeat its aggression. This is the popular support. I do not want to talk about the announced formulas but I want to note that what is currently in place, and what satisfies most of the Lebanese people regardless of some notes, provides this great security and stability in the country. Unfortunately, as political officials, we could not pair it with political stability and with regularity in institutions’ work.
It’s because there is a feeling that protecting borders should be the army’s role, and there are some who say that Hezbollah’s weapons must be integrated within the state’s weapons.
This issue must be discussed when discussing the defense strategy. Meanwhile, there are points of view which stipulate that the historical experience in terms of the conflict with the Israeli enemy calls for the Resistance’s efficient presence alongside the Lebanese army in the confrontation.
Regarding the demarcation of maritime and land borders with Israel, this issue was on the table of discussions with the Americans. In the past, demarcating maritime borders was linked to demarcating land borders, and this is what obstructed the oil-related affair as Lebanon is behind in addressing it. Where are we today? Have you separated between the two issues, and are you heading in the direction of demarcating maritime borders?
I do not agree to the idea that linking these two issues delayed the oil affair. The latter affair is supposed to be taking its normal path. We have awarded contracts to drill in block nine and according to the timeframe, the drilling and exploration must begin. Block nine is adjacent to the borders with Occupied Palestine and there could be a dispute or a disagreement one way or another. From my political perspective as a minister who represents the Amal Movement, we strongly and clearly believe in the importance of linking between maritime and land borders so as not to lose any of our strength elements in the negotiations especially that experience has shown that neither the American nor the Israeli are willing to be biased to the Lebanese perspective, and this is normal regarding the demarcation of these borders.
It seems Speaker Berri changed his mind, so does he want to proceed with maritime borders first or not?
We do not mind talking about the maritime borders but they are linked to each other. There’s the American and Israeli point of view. Maybe there are Lebanese stances with positive background stating that let’s finalize the land border first and then move to the maritime borders. We have our clear perspective, that this should happen within the framework of a tripartite committee that meets in Naqoura under the UN’s auspices. Others have suggested different proposals that are linked to international rulings via international courts. I think there are different opinions regarding this issue but this will not be a topic of Lebanese domestic differences.
And the issue of oil will not be a window towards peace with Israel?
For us, there’s clear enmity towards Israel. When it comes to oil or the land borders, if an agreement is reached over a mechanism to benefit from them, they will not pave way for peace with the enemy.
As you mentioned as a minister of the Amal Movement, the most prominent Arab face is Speaker Nabih Berri. How was his visit to Iraq? It’s a special visit especially during this time.
During the past years, Speaker Berri received many invitations to visit and he was waiting for the opportunity so the visit is meaningful for finalizing constitutional mechanism in Iraq and finalizing the institutional quorum. There’s always been Iraqi keenness that Berri visits. I think it’s a good time as it gave a push to Lebanese-Iraqi relations. During his visit, Berri emphasized how important it is for Iraq to go back to playing a pivotal Arab role since it’s a pillar in joint Arab work and also given the peculiarity of its location. This is in addition to its political role in terms of bringing points of view closer such as Arab relations with the Islamic surrounding, particularly between Arabs and Iran. Berri was clear that Iraq with its human and financial capabilities and its geographic location and Arab history can play this role. I think he has given a push to this one way or another.
We feel that Lebanon is the arena of regional tensions and of indirect war between Arab countries and Iran. Can this country which is an arena for tensions play a positive role and lead to some sort of reconciliation or a new page of relations?
We believe it’s important that neighboring countries, Arab and Muslim, organize their relations with one another in a good way. This issue is mainly about equal Arab-Iranian relations. Lebanon, through the role of its political leaders, and given its location and special role, is capable of pushing this forward. We do not want to ignore that there’s a complicated network of international relations and international pressure. There are new parties on the regional arena that can make tensions take different dimensions today. Russia is back to playing its pivotal role in the region. The new American stance with President Trump’s administration can relatively wither this role at this stage but Lebanon remains capable of making exceptional differences in people’s relations.
Is there a war coming against Lebanon?
All the existing givens and balances exclude the possibility of a close war but there are different wars in which pressure is exerted through money and economy. There’s also the nature of organizing relations of countries among each other. These are one form of war.
I’ll conclude with a question that concerns the Amal Movement. After a long time, and after Berri, who will Berri nominate?
We believe Berri is in the peak of in his political contribution. No one at all brings this up. He knows well, and he often voices this during his internal and foreign meetings, that there are organizational institutions which makes decisions in these cases.SHOW MORE