One of the simple additional examples that confirm that the ruling system is not qualified to set reform policies, rescue programs, or even a recovery plan is how Lebanon wasted the special drawing rights (SDRs) it received from the International Monetary Fund (IMF) in late 2021, which amounted to $1.136 billion.
Unlike other Arab countries that have effectively utilized IMF allocations to achieve debt sustainability, increase their investment expenditures, and improve their financial situation, Lebanon has squandered these funds on subsidies and expenses that contribute zero percent to improving Lebanon's financial situation.
Meanwhile, some other Middle Eastern countries have used their allocations to reduce their debts to the IMF.
Since Lebanon is not yet indebted to the IMF, the way it spent around $750 million amidst its severe economic and financial crisis is among the worst in the world's history in the last 150 years, indicates that the ruling class, without any imposed rescue program or conditional recovery plan by external entities, is not capable of leading the country out of its financial catastrophe.
The evidence is that they misused these financial allocations as they had the freedom to spend them as they saw fit despite ESCWA's recommendations on how Arab countries facing current account deficits should use the new allocations to address recurrent financial and external imbalances that hinder recovery and growth.
What did the countries in the region do?
For comparison in how the countries in the region have utilized their Special Drawing Rights (SDR) allocations, Iraq used it to fully repay its debt to the International Monetary Fund (IMF). In contrast, Yemen used it to significantly reduce its debts to the IMF without drawing a significant portion of its SDR allocations.
Conversely, Egypt used the majority of its SDR allocations to repay some of its debts and eliminate its status as the world's largest debtor to the IMF after Argentina.
Additionally, countries like Algeria, Israel, and Saudi Arabia participated in voluntary trade agreements to purchase SDR allocations from other governments in exchange for foreign currencies, which boosted their reserves during the past year.
For example, the additional assets obtained by Saudi Arabia helped deposit significant amounts in the central banks of Egypt and Pakistan, contributing to the kingdom's regional and international economic influence.
So far, seven countries in the region have utilized their allocated SDRs from 2021, with five of them using almost their entire allocations, such as Egypt, while Lebanon still retains a minimal percentage of only 0.3 percent.
How were the funds spent?
Lebanon, by a unilateral decision of its Caretaker Prime Minister or CaretakerMinister of Finance and the Governor of the Central Bank, spent $747 million out of a total of $1.121 billion on: subsidizing wheat and medicine imports with a total value of $364 million, around $220 million for fuel imports for the benefit of Electricité du Liban, around $110 million to repay loans, around $13 million to cover expenses related to passport issuance, around $683,000 for legal fees due to the Ministry of Justice, in addition to around $34 million to repay special drawing rights fees.
Municipal Elections Funding
Recently, there has been a heated debate about the validity of resorting to the remaining special drawing rights to finance the cost of conducting municipal elections, amounting to $9 million.
Those who seek to obstruct the elections use the argument of using the special drawing rights funds. At the same time, those who have squandered around $750 million of it will not be bothered by an additional $9 million!
However, as revealed in the proceedings of the joint parliamentary committees yesterday, according to MP Ghayath Yazbek, "There is a will among a group of parliamentary blocs in coordination with the government to intentionally delay the municipal elections, while some MPs proposed postponing the elections for administrative reasons."
Yazbek told "Nidaa al-Watan" that the process of evading holding the elections has gone beyond the issue of funding from the special drawing rights funds, as there was no serious discussion in the first place about ways of financing "while using the special drawing rights funds is a solution to all the problems that hinder the conduct of the elections."
He also confirmed that the MPs of the Strong Republic bloc would not participate in any legislative session to postpone the municipal elections.
In this context, former official Mohammed Al-Hajj at the International Monetary Fund (IMF) explained that the governing authority squandered its Special Drawing Rights (SDR) funds in the same way it squandered the funds of depositors, with the difference being that the SDR funds are a loan that the country has to repay with interest to the IMF."
Al-Hajj further explained to "Nidaa al-Watan" that Lebanon used this loan to finance current expenses, similar to most of the loans it previously obtained from various sources, which were used to finance current spending rather than capital investment.
He also pointed out a fundamental issue related to spending the SDR funds outside the state budget by urging the central bank to implement fiscal rather than monetary policies, distorting the overall economy.
As a result, the state budget is not comprehensive and does not include the expenditure from the Special Drawing Rights (SDR) funds."
He viewed that the way Lebanon is using its Special Drawing Rights (SDR) funds is also a patchwork process and a waste of money, nothing more and nothing less.
When asked about the optimal way to use these funds, which amount to billions of dollars in a completely distorted economy, he responded, "In an ideal situation, they could have been fully used to build a power generation station, for example, which would benefit the economy, alleviate the burdens on the state budget, and reduce the burden on citizens by lowering the electricity generator bill."