Beirut, Weekly Report # 6, February 28th, 2020

by Yves

Two main headlines for this week.

The spread of the coronavirus and the visit of the IMF team and its consequences.

Last week, on Friday 21, a case of the coronavirus was detected on a 45-year-old Lebanese woman travelling back from the Iranian city of Qoms, where two mortal cases had already been reported. Early this Monday, two flights coming from Iran were screened and no other cases had been reported yet by the authorities. However, no flight interdiction was pronounced so far. By Friday 28, a total of three cases was identified in Lebanon, the last one coming from an Iranian citizen.

On the financial front, and for the third time since 2019, Moody agency has lowered Lebanon’s rating. If the restructuring of the debt is implemented creditors might lose between 35 and 65% of the value of their purchase. The government now have the choice between two set of options, the first option would be not to pay its own creditors.

Option two would be negotiations. For option two, three possibilities can be envisaged: a moratorium to push back the dates of payment, a negotiation on the timing linked with lower interests and longer deliveries and finally a reduction of the debt (what is called a “haircut”) which could go as far as wiping out the debt.

If the reduction is bigger that the funds in the bank, then it will have to take the difference on the customers.

The IMF team which had planned to stay till Sunday 24 finally decided to wait till the government has decided whether it wants its help or not. Currently, there are different views not only between the opposition parties and the government but also inside the governmental coalition, between Amal and Hezbollah. Naïm Kassem, Hezbollah’s number 2, has pronounced itself against any IMF intervention while AMAL Nabih Berry would support some sort of intervention. The press has declared that any measures of accountability which would be demanded by IMF, would have to deal in particular with the management of the airport and the harbor from which the Hezbollah is making significant and often illegal resources.

Two other issues have also been pursued.

First the subject of early elections although without much strength this week even if Walid Joumblatt’s PSP has proposed a new proportional electoral law with Lebanon as a unique nation-wide center.Secondly, the announcement Wednesday by President Aoun of the beginning of the drilling by explorer ship Tungsten Explorer (From the US company Vantrage Drilling), on the Lebanese continental platform. This research is being done on Bloc 4 (there are 4) on behalf of the consortium Total-Eni-Novatek for two months. A very significant amount of natural gas as well as gas have been expected to be found for two years, but exploration as such had not been launched yet. However, potential outcome might not be forthcoming before 2029.