What was wrong with the 2020 Lazard Plan?

[admin admin]

Mounir Rached

When the Council of Ministers approved an economic reform program at the end of April, 2020, then-Prime Minister Hassan Diab hailed the plan with the epithet that ”the State has in its possession, for the first time in history, a complete and integrated financial plan.”

However, Diab’s optimistic assurance that this document, based on a study prepared for the Lebanese government by US-headquartered financial advisory firm Lazard, would “put an end to floundering financial policies that brought the country to the current state of collapse” was disputed long before the cabinet’s resignation in the aftermath of the August 4, 2020 Beirut Port explosion.

Diverse voices, from the banking industry to economists, academics, and economic media, offered critical responses, amendments, and counter proposals to the government rescue plan from the moment of its release. In one, from today’s vantage point ironic, example, a document by various authors at the American University of Beirut (AUB) asked if the government’s financial recovery plan was a “Rescue or Jeopardizing Plan.” The introduction to the document noted that the plan does not call for celebration but rather “generates valid concerns about its directions and goals.” This introduction was penned by Nasser Yassin, then director of the American University of Beirut’s Issam Fares Institute and today minister of environment in Prime Minister Najib Mikati’s cabinet.

Other criticisms and counterproposals to the plan were listed on a webpage of the library of finance at the Institut des Finances Bassil Fuleihan. Issues of Executive Magazine that contain comment and analysis pieces on the numerous rescue proposals under discussion at the time include the February, March/April, and June/July issues of 2020. Given that a new rescue plan for the much worsened Lebanese economy is a matter of high importance, and that there have been references to Lazard in remarks by Prime Minister Mikati, Executive aspires to inform the debate by publishing, for the first time in an English-language magazine, the detailed critique of the Lazard plan by Mounir Rashed.

In his introduction to his critique of the Lazard plan, Rashed noted “several gaps” in the so-called reform agenda adopted by the former Lebanese Government. “Reviewing the government’s plan makes it evident that the plan sets the stage for further restrictions on the Lebanese economy while dismantling its vital private institutions, including banks, which may cause a rift between the country’s social classes,” Rashed wrote in an assessment that is as concerning today as it was then. He elaborated further that the plan in his analysis represents, among several erroneous assumptions on the economic structure of Lebanon, a blatant violation of the Lebanese constitution, submission to foreign interests, and is apt to further corrode citizens’ trust in the state.

The following article has been adapted from a confidential report written in May 2020. Most references in the text below are to the 2020 plan and the cabinet of Hassan Diab. The author has updated the text in November 2021 after Prime Minister Mikati started negotiations with the International Monetary Fund (IMF) and the Cabinet presented a revised financial recovery plan in end-November. Material changes in the updated text are italicized in the text.

https://www.executive-magazine.com/business-all/analysis/what-was-wrong-with-the-2020-lazard-plan

[Author]

Posts