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The July 2022 issue tested the proposal, then circulating in Lebanon, to create a sovereign wealth fund (SWF) as part of the answer to the financial crisis. It asked the decisive question of ownership. The government was divided along confessional lines, Banque du Liban carried a loss gap of around US$60–70 billion and had lost credibility, and the Ministry of Finance was seen as too closely aligned with a single political faction; the authors doubted that any arrangement would be fully depoliticised.
The issue described a deadlock in which banks pressed for the sale of state assets and gold to repay their claims, public opinion held that those assets belonged to the nation and future generations. It set out a well-organised privatisation programme under a Privatisation Commission as a less politicised alternative or complement, with proceeds shared between an SWF and the budget.
Its recommended structure was dual: a savings SWF, on the Norwegian model, to restructure state enterprises and share hydrocarbon revenues with future generations, and a stabilisation fund to smooth budget cash flows and repay government debt to banks. Both would require a parliamentary law and independent governance with a civil-society ethics board.
Key findings
- At the start of the crisis, government debt to banks was about US$35 billion and to the central bank about US$32 billion, while the central bank owed banks around US$155 billion.
- The listed state assets, from telecoms and utilities to ports, airports and gold, were estimated at roughly US$30 billion in liquid form and US$40 billion in asset form.
- Gold reserves of 9.22 million ounces, then worth around US$17 billion, had been protected by a law prohibiting transactions in them; the issue called for a similar law for SWF assets.
- The issue judged IMF-backed reform the more desirable route but noted that it would take at least five years, while an SWF was faster but exposed to diversion of assets.
Archive: written in Jul 2022; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.