The Deal of the Century, the Surrounding States, and a Look at Maysarah

Lebanon announced a few days ago that it is in a dire financial situation and that it cannot repay the service on its external debts, amounting to approximately 33 billion dollars, and that it will refrain from paying them, noting that its total external debts amount to about 92 billion dollars, which represent about 174% of GDP; thus Lebanon is one of the countries with the highest ratios in the world of external debt to GDP (which measures the size of a country’s economy), according to World Bank Group statistics. These statements were later amended to say that Lebanon will ask creditors to freeze their claims or suspend the repayment of these debts, as the Lebanese Minister of Finance recently stated that Lebanon will default on the debts and their interest in what he called a process of “managed default,” until it regains its economic health..!!

At the same time, the Governor of the Central Bank of Lebanon announced that foreign currency reserves at the end of last month were about 35 billion dollars..while the Lebanese Minister of Finance recently announced that the reserves were about 20 billion dollars..after spending an amount of 7 billion in the recent events to manage and confront the liquidity crisis at banks in Lebanon.

During our monitoring of the financial data of indebted governments through international credit rating agencies such as Standard & Poor’s..it showed that the per capita share of debt for the Lebanese is estimated at 11,661 dollars according to World Bank Group statistics for 2018 (which include the International Centre for Settlement of Investment Disputes, the Multilateral Investment Guarantee Agency, the International Finance Corporation, the International Development Association, the International Bank for Reconstruction and Development). It is one of the largest ratios in the world!!.

In this regard, Lebanon, Tunisia and Jordan are among the Arab countries with the highest per-capita shares of their countries’ external debt. In addition to Lebanon, and in the same statistic, Jordan also appeared, having exceeded the ratio of 97%, with a total public debt of about 42 billion dollars. The per capita share of public debt for Jordanians in the 2018 statistics was about 3,232 dollars per person; likewise Tunisia, whose external debt according to the 2018 statistics was 34.663 billion dollars...and the per capita share of this external debt amounted to 3,014 dollars.

As for Egypt’s debts (according to 2018 statistics), external debt exceeded 109 billion dollars, while domestic debt was about 241 billion dollars, and the per capita share in Egypt of the external debt amounted to 100 dollars. Egypt and Nigeria are considered to have some of the lowest per-capita external debt rates in Africa due to their large populations..

Meanwhile the Kingdom of Saudi Arabia and the United Arab Emirates achieved the lowest ratios of external debt to GDP among countries; for example, the external debt to GDP ratio for the Kingdom of Saudi Arabia was about 21.8%, while for the United Arab Emirates the ratio was about 20%..As for Turkey, the ratio reached about 35%.

The causes of what happened in Lebanon are many and intertwined: there are internal possibilities as reflected in mutual accusations between parties and political groups and protests, or from powerful groups and classes collaborating with foreign actors and corrupt, with sabotage taking place inside the country, at the same time that creditors find a safe passage to implement their plans under the banners of sustainable development, justice and women’s empowerment..NGOs conduct digitally modified surveys to serve the agendas of their funders; it is sufficient that a survey issued by a civil organization funded from abroad regarding a certain sector of activity be published for global intervention to occur..it is the age of globalization. Or the causes may also be external parties targeting certain countries such as Lebanon, which has certain resources...they create crises in it to find solutions of their own making through the World Bank, for example. In this context, a country like the United States, for example, if it dislikes the policy of a country like Lebanon, can create an economic crisis in it or impose a kind of siege on targeted segments of society; they set traps, such as the trap of internal conflict, or they may list or continue to list certain groups as terrorist organizations or financial institutions that finance terrorism..and it is difficult to remove the effect of this controlling button on the fates of the majority of the world’s countries..., as happened with Sudan when it was classified as terrorist..then it was courted and led to normalization with Israel, when one of the leaders of the military presidential council in Sudan met with Netanyahu, which stirred controversy and created new concepts in political dealings in the Middle East, and then after days Sudan’s name was removed from the list of terrorist states or state sponsors of terrorism.!!...Everything has a price..and the price is sovereignty of the state passing through to its economy and its people.!!

There are four traps that are set for developing, low-income countries, which number more than 120 countries in the world, when they ask for assistance in fixing their economies; these traps are the headings of intervention campaigns: the trap of sustainable development,......the trap of conflict,....the trap of natural resources,.....and the trap of bad governance...as the author of the book The Bottom Billion by PAUL COLLIER said) asked, why do the world’s poor countries, which number a billion people, fail to grow, and what can be done to make them succeed?), so is globalization truly aimed at rescue?..

World Bank Group statistics noted that low-income countries numbered 29 in the World Bank statistics for 2018, including in the Arab world: Yemen, Syria and Somalia..As for middle-income countries, they numbered 91, including in our Arab world: Jordan, Algeria, Egypt, Lebanon, Mauritania, Sudan and Tunisia.

The World Bank statistics for 2018 reported that global indebtedness exceeded about 253 trillion dollars at the end of September 2019. As for the external debts of low- and middle-income countries, they amounted to 7.8 trillion dollars..The Middle East and North Africa region amounted to 321 billion dollars..and these are mostly long-term debts..and their creditors are mostly international financial institutions such as the International Monetary Fund, the World Bank and the Paris Club...

It is noteworthy that one statistic specialized in external debt data for countries showed that external debt statistics do not in fact include military external debt, which is usually under bilateral agreements, in addition to excluding external debts not guaranteed by the government, as they are also excluded from the statistics...!

Therefore it is expected that Lebanon will negotiate with creditors through the World Bank as one of the existing possibilities, and appear before the Paris Club of creditors..which includes financial representatives from some of the world’s largest economies and more than 19 countries according to my information, which seeks alternative means and solutions for the indebtedness crisis of distressed countries..The Paris Club’s response may range between positive and negative, and that depends on whether the indebted country has implemented reform programs for its economy through World Bank programs and its conditions!! Or not, and it is natural that negotiators in the Paris Club will examine the reasons for the crisis the country faces despite their knowledge of the causes via reports of international financial institutions, whether from mismanagement, or major economic imbalances in the indebted country, and they will also address domestic public debt, public spending, imports and exports of the country, foreign currency reserves, financial institutions in the country and remittances from expatriates....etc. Negotiations to reschedule the debt may stall, in which case creditors resort to freezing the accounts of indebted governments in foreign banks..and to many harsh measures that indebted countries may face..At the same time, some countries may resort to demanding the write-off of debts or part of them due to the current lack of financial capacity of the country..Consideration of such requests usually depends on the political stance and approval of the creditor countries toward the governments negotiating with them...The Paris Club, through the World Bank, may impose reform plans that will return Lebanon to levels of deprivation and poverty among its population where they will face austerity programs and unemployment as it is likely that many workers will be laid off, and social assistance programs will be cut...in addition to the necessity of political alignment with what the creditor countries accept!!

As for the experiences with the option of declaring state bankruptcy, indebted countries have resorted to suspending payment of part of their external debts, as happened with Venezuela at the beginning of 2018, when its external debt was about 150 billion dollars, when it was declared unable to meet part of its obligations. In some stages of insolvency, countries resort to declaring total state bankruptcy, as happened with a group of Latin American countries, such as Argentina in 2001 when its bankruptcy was declared and its currency was devalued by about 65%. Brazil attempted to go down this path, but it backtracked. Greece and Ecuador were also declared bankrupt, while Mexico was declared bankrupt twice, one of them in 1982, when its external debt was about 86 billion dollars, and the United States later assisted it to revive its economy with some industrial countries. As for Russia, it was declared bankrupt in 1998 when its external debt was about 141 billion dollars and its currency fell rapidly; its domestic debt, however, was 51 billion dollars.

It is not unlikely, in the situation of a state like Lebanon, that its collapsed economic condition, after its declaration of inability to repay and service external debt, could be exploited; it is likely that pressure would be applied to change its external political positions and the internal stances of sectors of the people, and that assistance to Lebanon would be exchanged for its acquiescence to conditions including curbing the sovereignty of the Lebanese state in their understanding, and the resettlement of Palestinian refugees, by peacefully accepting the Deal of the Century, through which projects that will benefit the Lebanese people will be established... And it is possible that debts will be written off...and this brings us to the other part of this posting of mine, which is the mentioning of Lebanon in the economic peace projects included in the Deal of the Century.... This is a possibility—and a reality—for all the Arab countries surrounding Israel whose names appeared in the Century Plan; they will be in the same situation, if not worse. Their peoples will be starved if they oppose...!!
When we reviewed the economic framework of the Deal of the Century that was circulated at the Manama conference in Bahrain months ago under the title Trump Vision – Peace for Prosperity, we found economic references in the political framework, the economic framework and financial allocation statements for the countries of the region which were named explicitly as Jordan, Egypt and then Lebanon... And when the texts of the economic framework of the deal indicated that the countries of the region must be invested in to improve the economic prospects of the region as a whole, attention must be devoted to the growth of the private sectors in the neighboring countries... which create tens of thousands of direct and indirect jobs for their citizens. Regional integration and cooperation have the capacity to create important new economic opportunities for the Palestinian people... In building new infrastructure in these countries to facilitate trade and movement across the West Bank and Gaza and Jordan and Egypt and Israel and Lebanon... from improving airports and ports in neighboring countries to developing a regional center for natural gas trade in Egypt. The value of the funds in the Deal of the Century that were planned to be spent in the Deal of the Century amounted to 50,670 billion dollars, of which 27,813 billion dollars were for the West Bank and Gaza, and 22,857 billion for the countries of the region, with Egypt’s share being 9,167 billion dollars, Jordan 7,365 billion dollars, and Lebanon 6,325 billion dollars.

The Deal of the Century, through the texts of its economic framework, saw that Egypt, Jordan and Lebanon are holders of large external debts—and they are important markets for Palestinians—facing clear economic challenges, and this project will rely on the national development plans of these countries to help them overcome the obstacles that impede their economic growth. By supporting efforts to generate local electricity and improve water delivery and by boosting private sector activity, strengthening financial institutions, and modernizing public sector services, these investments will reduce the risks of undermining economic stability in the region and create a large opportunity for Palestinians to increase exports, develop foreign direct investment, and build partnerships in the region.

It is clear that the countries directly surrounding Israel, which host Palestinian refugees, are being targeted and that their societies and economies are being prepared to implement the economic stages of the Deal of the Century... It is not unlikely that financial and economic insolvencies will be created and imbalances deepened in these countries until they are brought to heel... !!