Lebanon This Week 641

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Lebanon This Week 641

July 20, 2020

  • Lebanon has 20th highest level of gold reserves globally, second highest among Arab countries
    Figures released by the World Gold Council show that Lebanon holds 286.8 tons in gold reserves. As such, Lebanon ranked in 20th place in terms of gold holdings among 96 countries, as well as the International Monetary Fund, the West African Economic Monetary Union, the European Central Bank and the Bank for International Settlements. It also ranked in eighth place among 66 non-OECD countries and in second place among 15 Arab countries included in the survey. The World Gold Council compiled the data from the International Monetary Fund's International Financial Statistics. The figures are two months in arrears, which means that gold holdings are reported for May 2020 for most countries, and for April 2020 or earlier for countries with delayed reporting.

    Globally, Lebanon had more gold reserves than Spain (281.6 tons), Austria (280 tons) and Poland (228.6 tons); while it held fewer reserves than Uzbekistan (342.8 tons), Saudi Arabia (323.1 tons) and the United Kingdom (310.3 tons). Also, Lebanon held more gold than Poland and less than Saudi Arabia among non-OECD countries. The United States is the top holder of gold in the world with 8,133.5 tons, while Haiti ranks in last place with 1.8 tons in gold reserves. Lebanon's gold holdings accounted for about 21.5% of the Arab region's aggregate gold reserves, for nearly 3.1% of the holdings of non-OECD countries and for about 0.8% of global gold reserves. 

    Further, the value of Lebanon's gold reserves was $15.94bn at the end of May 2020, based on a price of $1,728.7 per troy ounce as published by the London Bullion Market Association.

    In addition, Lebanon's gold holdings were equivalent to 31.1% of the country's official assets in foreign currency plus gold reserves as of May 2020, which ranked Lebanon in 21st place globally, in 11th place among non-OECD countries and in first place among Arab countries. Globally, Lebanon's share of gold reserves out of its official foreign assets is higher than that of the European Central Bank (31%), the Kyrgyz Republic (25.7%), and Finland (23.7%); while it is smaller than the share of Turkey (36.4%), Mongolia (34.7%), and Belarus (34.6%). Also, Lebanon's share of gold holdings out of its official foreign assets is higher than the share of the Kyrgyz Republic and lower than that of Belarus among non-OECD countries. The gold reserves of Venezuela are equivalent to 82.3% of its total foreign exchange reserves, the highest share in the world, while Hong Kong's gold holdings account for 0.03% of its total foreign assets, the lowest such share globally.
     
    *as of May 2020
    Source: World Gold Council, Byblos Research

  • World Bank identifies priority actions to reform electricity sector
    The World Bank's Power Sector Emergency Action Plan for Lebanon indicated that the electricity sector in Lebanon has been at the center of the country's economic and fiscal imbalances for decades. It noted that the sector has not adequately supplied electricity to consumers, which has significantly impacted economic and social development, and increased public distrust. It estimated that Electricité du Liban (EdL) secured only 55% to 64% of Lebanon's electricity needs in 2018, while private diesel generators supplied the remainder of the country's electricity demand.

    It indicated that the cost of supplying electricity in Lebanon is elevated, largely due to the cost of fuel, including the cost of temporary generation through barges, as well as expenditures for power purchases from Syria, and operation and maintenance costs. It pointed out that the cost of fuel accounted for 64.5% of the total $2.6bn cost of supplying electricity as estimated in 2018, which makes the electricity sector vulnerable to fluctuations in international fuel prices. It said that operation and maintenance expenditures followed with 27% of total electricity costs, while expenses for power purchases represented 8.5% of the total. It pointed out that Treasury transfers to EdL averaged 3.8% of GDP annually in the 2008-18 period, which represented about 50% of the country's average annual fiscal deficits. It added that the government transferred a record high of $2.2bn to EdL in 2012, which was equivalent to 5.1% of GDP. 

    The World Bank indicated that EdL is constrained by challenges in its governance structure, by limited control over its budget that dilutes its focus on improving operations and services, as well as by a lack of transparency in its finance, human resources, procurement, accounting and technical planning processes. It identified priority actions that it classified under the governance, security of electricity supply, financial stability, and environmental sustainability pillars. 

    In terms of the governance pillar, it called on authorities to establish the Electricity Regulatory Authority (ERA), which will help safeguard the sector's transparency and promote accountability. It also stressed on the importance of modernizing EdL through strengthening its governance structure, core business areas, operations, and administrative processes. It encouraged the Ministry of Energy & Water to establish a department for energy infrastructure planning, and to develop a framework that redefines the roles of all major stakeholders, such as the Lebanese Petroleum Administration and the Lebanese Center for Energy Conservation, in the planning process.

    In terms of the security of electricity supply, the Bank highlighted the importance of mainstreaming and expanding renewable energy generation, which has played a secondary role in the sector so far, in order to reduce the dependency on costly imported fuels. It said that the government will need an additional 4,700 megawatts of renewable energy capacity in the next 10 years to reach its target of producing 30% of electricity demand from renewable energy sources by 2030. It also stressed on the need for authorities to accelerate the installation of the floating storage regasification units at Zahrani in the South and at Deir Amar in the North to import gas, as well as to launch separate tender processes for additional temporary and permanent generation capacity. 

    In terms of financial stability, it called on the authorities to pursue tariff reforms based on a clear action plan, and to adopt a framework to lift subsidies while protecting the poor. It also stressed on the importance of reducing technical and non-technical losses on EdL's distribution network through accelerating the rollout of smart meters, and of improving revenue collection through establishing a mechanism that facilitates the timely payment of electricity charges by public institutions. The Ministry of Energy & Water estimated the accumulated arrears of public institutions to EdL in the last 10 years at over $1.2bn. In terms of environmental sustainability, the Bank called on authorities to reinforce policy, regulatory, infrastructure, financing and capacity building mechanisms to promote and implement wider energy efficiency measures.

    The World Bank concluded that the implementation of these priority actions would reduce the cost of supplying electricity in Lebanon, would increase energy supply to provide customers with reliable electricity, and would eliminate the need for costly and polluting private diesel generators.
     

  • Lebanon ranks 127th globally, 12th among Arab countries in electronic government
    The United Nations' E-Government Development Index for 2020 ranked Lebanon in 127th place among 193 countries worldwide and in 12th place among 19 Arab countries. Also, Lebanon came in 47th place among 58 upper middle-income countries (UMICs) included in the survey. Lebanon's global rank regressed by 28 spots from 99th place in the 2018 survey, constituting the second steepest drop globally; while its regional rank retreated by three spots from ninth place in the previous survey. 

    The index benchmarks the development of electronic government across member states of the United Nations. It is a composite indicator that measures the willingness and capacity of national administrations to use information and communication technology to deliver public services. The index is a weighted average of three sub-indices that represent the most important dimensions of e-government, which are the Online Service Index, the Telecommunication Infrastructure Index and the Human Capital Index. A country's overall score ranges from zero to one, with a higher score reflecting a more developed electronic government system.

    Globally, Lebanon has a more developed e-government system than Rwanda, Syria and Nepal, and a less advanced one than Nicaragua, Cambodia and Zimbabwe among economies with a GDP of $10bn or more. Lebanon received a score of 0.4955 points on the index, down by 10.4% from 0.553 points in the 2018 survey, and constituting the seventh steepest decline globally. Also, Lebanon's score is lower than the global average score of 0.5988 points, the UMICs' average score of 0.6204 points, and the Arab average score of 0.5549 points. Lebanon's score is also lower than the Gulf Cooperation Council (GCC) countries' average score of 0.7932 points, but it is higher than the average score of non-GCC Arab countries of 0.4449 points. Denmark has the world's most developed e-government system, while South Sudan has the least developed one globally.
     

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