The reforms are part and parcel of the investment program. They are not alien to the program nor imposed from outside our borders! The media and civil society must play their role as the fourth branch of power instead of advocating completely illogical arguments. This role is first realized by asserting the necessity of the execution of the investment program and subsequently in monitoring and keeping an eye on the public investment process to straighten its path if it drifts off track.

The Economic Conference for Development through Reforms and with Enterprises (CEDRE) was met with many comments, some favorable, and some not. The criticisms were not all biased and some of the acclamations were exaggerated! Extreme positions in either direction must be avoided, and the interests of the country and the citizens should have the last say in determining the way we ought to deal with the outcomes of the Conference. The memory of the Lebanese is overloaded with cynicism that has accumulated over the 40 years that the Council for Development and Reconstruction (CDR) has been around. The CDR has been associated in the minds of many people with chronic ineffectiveness, corruption and the squandering of public money. The participants at the Paris conference made the right decision when they commissioned the International Monetary Fund (IMF) and the World Bank to assess the public investment management systems in Lebanon and to propose suitable organizational frameworks.

On the other hand, those who have high expectations about the activities and results of the Conference also evoke memories of the past. They recall how the conferences held in Paris at the turn of the second millennium produced results that should not be underestimated. One of the major outcomes was ensuring the continuity of monetary stability, which shielded the livelihood of citizens from further deterioration. Two issues merit attention when assessing CEDRE. The first is the argument claiming that the reforms the Lebanese state has committed to implement were imposed by foreign entities and that these reforms will shackle the country and the people for the coming decades. The second issue pertains to the macroeconomic fallout study by the IMF, which is the best in this field, especially as it links reforms to investment.

It is a mistake to consider reforms as conditions that have been imposed. This attitude is widespread in local politics where bickering prevails and objections are raised to serve the narrow interests of parties, especially on the eve of parliamentary elections. The reforms are not imposed, but rather a necessity for the right and adequate execution of the infrastructure investment program. How could we launch such mega projects without providing appropriate conditions to operate, and without creating a framework to execute it with a minimum level of transparency to curb corruption and the squandering of public money? Years ago, some parliamentary committees (or subcommittees) discussed the creation of a ‘national authority for combating corruption’. This decision is still not approved! Moreover, how can we assign the Higher Privatization Council (HPC) the task of managing and monitoring the participation of the private sector in revamping and developing the infrastructure through public private partnerships (PPP) without providing the HPC with organizational structures and skilled and suitable human resources? How are we going to inject $2.15 billion in the first phase of the energy overhaul project, then $3.44 billion in the two subsequent phases, or a total of $5.6 billion, without putting an end to power leakages and stealing, inadequate bill collection, and an underpricing policy that does not cover but a tiny part of the cost?

However, Lebanon will witness a positive and beneficial scenario if the government abides by its commitment to implement the reforms listed in the working paper presented at the Conference, and if the infrastructure investment program approved by the international participants is actually executed. Investment in infrastructure boosts economic growth and creates an investment multiplier of between 1.8 and two times the initial input, according to the national accounting database from the early 1990s! The Central Administration of Statistics (CAS) should publish the current investment multiplier (if it has computed it). The IMF, which in addition to its assumption regarding reforms and investment, expects the economy to grow at a gradually accelerating rate to more than six percent over the five-year period 2018-2023. It also expects the budget deficit to narrow over the same period to six percent from ten percent at present. The IMF also anticipates that the debt-to-GDP ratio would drop to 148 percent from 155 percent. More importantly, it expects the current balance of payments deficit to narrow from 26.3 percent to 20.7 percent. The latter ratio remains high relative to global standards but the external deficit will be push for a downward correction trend. The country’s financial position will be exposed to unbridled risks if this ratio continues at the current pace.

The IMF’s approach in studying the macroeconomic dimension of the infrastructure investment program expresses the views of the countries and international financial institutions that participated in the Conference. The decline of the growth rate of the Lebanese economy in recent years to a range of one percent to 1.5 percent is all too clear. The concerned international entities know that the lack of economic growth is mainly the result of weakening investments by the public and private sectors, which account for 1.4 percent and less than18 percent of GDP respectively. The slowdown in economic growth was accompanied by an escalating public finance deficit. In the absence of investments and fiscal adjustment, this deficit is expected to account for 13 percent of GDP in the coming five years, compared with 7.5 percent in 2017. The coupling of weak economic growth rates with widening fiscal deficits would contribute to increasing public debt at about 180 percent of GDP.

The monetary situation is the most relevant factor when it comes to the household livelihoods. Making the Conference a success on both its reform and investment sides is the only guarantee to safeguard monetary stability. If large deficits in the current balance of payments (23 percent to 25 percent) continue, it will deplete the foreign exchange reserves of the banking sector which will decline from $37.5 billion to $18.6 billion by 2023, according to IMF estimates. On the other hand, these reserves are expected to rise from $39.7 billion to $53 billion over the period 2018-2023 if the reforms are implemented and the international community delivers on its commitments regarding investments. This gives the banking system, both commercial banks and the Central Bank, the capabilities necessary to maintain monetary stability in the country. It also allows the banking sector, in light of the anticipated improvement in deposit growth, to boost the growth rate of the credit provided to the economy once again to more than six percent from 4.2 percent. A radical change in monetary policy is very much needed. This change must involve reducing the interest rate structure on deposits and loans which would encourage private sector investments and also speed up the pace of economic growth.

The private sector must actively participate in these investments. Just as with the state, it needs to carry out broad reforms in order to become more effective. The PPP is not a magic trick that can be performed by issuing a new law or creating new administrative procedures. Past experiences in the field of contracting and public works, and the related disputes that ended in courts or in international arbitration, are not encouraging. These experiences need an honest reconsideration, and both the World Bank and the IMF have alerted us to this matter. It is not true that corruption is confined to the public sector while the private sector is immune. Corruption is in plain sight in Lebanon (accounting for at least five percent of GDP), therefore it cannot be hidden from those who want to see it, whether they are locals or foreign delegations.