Since 2016, the Bank of Lebanon had been fully aware of the country's impending bankruptcy. However, vital information was meticulously concealed at the urgent request of Riad Salamé, governor of the central bank, with the active complicity of the International Monetary Fund (IMF).

Two critical steps could have averted Lebanon's collapse in the fall of 2019, had the international community and its competent institutions not deliberately ignored two significant missteps.

The First Misstep

Nearly two decades ago, shortly after the outbreak of the economic crisis, a series of key events took place in Paris and Washington, profoundly impacting Lebanon's economy. In 2001, during the preparations for the "Paris I" conference, which ultimately led to the "Paris II" conference in 2002, an official Lebanese delegation led by the late Prime Minister Rafic Hariri went to Washington to meet with the IMF. The delegation included prominent government members such as Finance Minister Fouad Siniora, Economy Minister Bassel Fleihan, and Central Bank Governor Riad Salamé.

During this critical meeting, the IMF strongly recommended that the Lebanese government adopt a bold program, including a reduction in the fixed exchange rate of the Lebanese pound, in effect since 1998, at a parity of 1,500 pounds to the dollar. However, the Lebanese government of the time rejected this proposal, persuading the IMF of the need to maintain the unchanged exchange rate and not to consider it a threat to the national economy. President Fouad Siniora even mentioned this achievement in his book entitled "The Lebanese Public Debt - Accumulation and Negative Repercussions".

The IMF finally accepted this Lebanese "innovation", which proved to be a disastrous decision for the economy and productive sectors. This first misstep, which the IMF kept secret and did not correct at the subsequent Paris I, II, and III conferences, fanned the flames of collapse, the consequences of which spread under the ashes of the fixed exchange rate.

This chain of events thus led to a dire situation where the Lebanese economy faced escalating difficulties, without the IMF raising the alarm or taking necessary measures to counter this growing threat. History will record this sequence of errors that fueled the fire of economic collapse, leaving Lebanon with devastating consequences.

The Major Consequences of Exchange Rate Stabilization

Maintaining the exchange rate, supported by the International Monetary Fund (IMF) and the international community, brought disastrous consequences to Lebanon. At the Paris II conference, the country was granted colossal aid, reaching $4.2 billion. However, this policy had devastating effects. By artificially maintaining the exchange rate, the national currency was overvalued relative to its real value. This situation led to a dramatic increase in imports, which reached about $257 billion between 2000 and 2021, according to a study by the United Nations Economic and Social Commission for Western Asia (ESCWA). Furthermore, Lebanese tourism spending abroad reached nearly $4.1 billion per year from 2002 to 2018, with spending of $6.25 billion in 2018 alone, an increase of 12% over 2017, while total tourist spending was $5.6 billion. About $5 billion was also transferred out of Lebanon for foreign labor, much of which is employed in the domestic sector.

These figures contributed to the worsening of the balance of payments deficit, particularly after 2011 with the outbreak of war in Syria, leading to a decrease in income from tourism and foreign direct investments. From 2011 to mid-2021, the balance of payments deficit reached about $34.4 billion.

In other words, over the past decade, more than $35 billion has flowed out of the Lebanese economy, surpassing revenues from tourism, expatriate remittances, exports, and other income sources.

To offset these massive currency outflows, the Bank of Lebanon has been performing overdraft transactions by converting Lebanese pound deposits into dollars. This is on top of cash advances provided to the electricity sector, paid in dollars but unreimbursed at the exchange rate of 1,500 pounds, culminating in a total amount exceeding $40 billion, inclusive of interest. In addition to sparking a significant dollar drain, this artificial exchange rate fixation has paralyzed productive sectors, stifling their global competitiveness due to escalating internal production costs. Exports have dwindled, depriving Lebanon of a vital foreign currency revenue source.

The second mistake.

The repercussions haven't stopped there, as almost 15 years after the International Monetary Fund (IMF) criticized the decision to maintain a fixed exchange rate, it makes a second blunder at the expense of the Lebanese economy. It has emerged that the Bank of Lebanon faces a foreign currency reserve deficit nearing $4.7 billion. These figures were disclosed in a confidential IMF report intended for Lebanese financial authorities in April 2016, according to the Reuters agency, which was able to review the report.

Following the crisis's onset, three well-informed sources confirmed to the agency that Mr. Salamé, the bank's governor, strongly urged IMF officials during their discussions not to publicize this figure as it could destabilize the financial market. When questioned about this data's omission from published reports and the need for the IMF to take a more preventative role by advocating reforms, an IMF spokesperson declined to comment on the $4.7 billion deficit deletion. Instead, the spokesperson stated that the report highlighted early warnings and potential solutions to strengthen the financial system. They added that the IMF had emphasized the need to reduce economic and financial risks, primarily by attracting new deposit inflows to fill the considerable budget and external deficits, while specifying that substantial resources were needed to ensure banking capital resilience in the event of a severe shock.

The IMF's responsibility.

Alarm bells rang at the first signs, sounded by the International Monetary Fund (IMF), marking the death knell for a dangerous Ponzi scheme that has wrought devastating economic and social suffering on the Lebanese people. This financial treachery, initiated by the Central Bank that year, continued until the eve of the crisis. Predicated on high returns and imposing directives, it aimed to force banks to solely utilize available deposits. These amounts, drawn from Lebanese assets, were used to finance state expenditures, maintain the exchange rate, support the electricity sector, increase salaries, and fulfill many other demands. Unfortunately, over $82 billion vanished into thin air, converted into a local currency with no physical existence. Depositors withdrew them at a fictitious exchange rate, with a premium reaching more than 85% at different crisis stages.

According to information from the prestigious Swiss site Le Temps, it's now confirmed that the Central Bank of Lebanon had known since 2016 about the country's impending economic collapse. However, at the direct request of Riad Salamé, and with the complicity of the IMF, these sensitive details were carefully concealed, paving the way for the much-feared catastrophe. The site reveals that on April 9, 2016, Álvaro Pereira, the IMF's representative in Lebanon, delivered a report to the governor that served as a significant warning. Yet, at Salamé's urgent request, the IMF deliberately obscured 14 crucial pages. A hard-hitting article in the French press titled "Lebanon's Bankruptcy was Deliberately Provoked by Christine Lagarde's IMF," former director of the IMF from 2011 to 2016 and current president of the European Central Bank, in this Machiavellian maneuver. This analysis emphasizes that Lebanon's bankruptcy is in no way the result of simple mismanagement or endemic corruption, but rather the outcome of a conspiracy orchestrated by the highest leaders of the IMF.

The report concludes that the envoy representing the Lebanese state in these negotiations is none other than a prominent politician in the field of economics, whose professional career is closely linked to former Prime Minister, Fouad Siniora. He was also the accountant of the late President Rafic Hariri and held the position of director of the IMF's Middle East Technical Assistance Center. His active role in the removal of the crucial 2016 report, written by Álvaro Pereira, is undeniable.