Timour Azhari and Laila bassam

BEIRUT, (Reuters) – Prime Minister Najib Mikati said on Thursday that it was difficult to agree on a financial recovery program critical for guiding Lebanon out of the devastating economic crisis. He called this a “Kamikaze” operation.

The International Monetary Fund is looking for an approach to the $70 billion financial crisis. This plan will be the basis for discussions and crucial for the reactivation of the bank system.

Mikati stated that the economic recovery plan was not simple. He said this in a live news conference, after Mikati had announced the approval of the state budget for 2022.

Since late 2019, Lebanon is in financial crisis. The massive public debts have caused the financial system to collapse, sinking the currency more than 90% and putting a large portion of the population into poverty.

Mikati declared, “The recovery plan [is not] easy, nor easy, and it is taking all the time,” in a live news conference, after cabinet approved 2022’s state budget.

According to Mikati, the news about the plan that had been published in the media was false. Mikati indicated that the plan has a variety of options, and that they are currently in discussion with IMF.

Reuters has seen a draft plan for recovery that was last month. It proposed to convert the majority of the $104 trillion in hard currency deposits into Lebanese Pounds, and only $25 billion to those who saved in U.S. Dollars.

An earlier recovery plan that was drawn up in 2020 by a government was thrown out by central banks, powerful political parties, and commercial banks. The disagreements over loss size and distribution led to the demise of IMF talks.

Since the financial crisis that erupted late 2019, more than 90% of the Lebanese Pound has fallen by over 90%

The government has not yet to cancel the former pegged exchange rate, which was 1,500 pounds per dollar. However, the new budget will apply a rate that is closer to customs transaction market value of about 20,000 for the first time.

Mikati said that the budget projecting spending of 47 trillion pounds would have a deficit around 7 trillion pounds. This is equivalent to roughly $330 million at Thursday’s parallel market rate.

The budget was not prepared by him. He also did not give the percentage of GDP that the deficit represented.

Mikati claimed that the deficit was going to rise when state spending on crippled electric sector was approved.

The parliament must still approve of the budget.

Samir Daher from Mikati’s economic advisory said, “This budget is a stabilization.”

“It is like someone falling off the seventh floor of a building. We want them to land on our feet, not on our heads.” After it is approved, there’s much to do.