The president of the Council of Ministers Saad Hariri said that the political consensus that we now have is very important and will allow Lebanon to implement the necessary reforms.

In an interview with Hadley Gamble on CNBC, Hariri added: “Standard and Poor’s gave us six months, and we are going to use these six month to pass every single reform that we should pass in Lebanon. I ask investors to sit and watch us. Like S and P gave us this chance, I tell them give us this chance. I am confident we will reach those numbers”.

This is the transcript of the interview:

Question: Your excellency, thank you so much for joining CNBC, I want to kick off by asking you about Lebanese economy today, you have a very high debt to GDP ratio, around 150 % and you’ve now said that the country is in an economic emergency, is this an economy that’s on the verge of collapse?

Hariri: Look, we understand that we have a problem and we know what the problem is and we need to fix that problem. ?We started fixing it from the budget of 2019. The problem is the fiscal deficit problem that we have had in the past years. We had a lot of talks with a lot of financial institutions, especially the IMF, and all of them are giving us advices on how to move ahead. Our strategy is to stabilize the problem that we have. Most important thing is not to deteriorate more, right? So what we are doing is fixing our debt to GDP, our deficit to 7.6% this year, we want to go down to 7% next year, or maybe a little bit less. And then continue on stabilizing this deficit. At the same time, we are building the platform of new laws, like the PPP law that involves the relation between private sector and public sector. We want to privatize certain areas and this is what we are preparing. Electricity is one of our biggest problems. And we passed a strategy for the electricity. By mid-or end of September the request for proposal will be ready, it’s being worked on with the IFC, the world bank and our ministry. In the beginning of the year, we should have a winner and the work will start. Yesterday we had a meeting at the presidential palace, where we put certain criteria that we have to reach in the coming three years. This is what we are trying to do. I understand that we have a problem but I am extremely confident that we can get out of this problem if we follow through all the steps we put in front of us.

Question: Ok, so when you declare an economic emergency, generally the rule is that you call the IMF, you bring in the cavalry. Do you have any plans to do that?

Hariri: We had the IMF here, had long talks, the IMF told us what we need to do. We did not go into a program because we feel the procedures and the reforms we are going to do are the same things the IMF are advising us to do.

Question: Wouldn’t you want them on board?

Hariri: I think the IMF has certain criteria’s that we cannot apply, especially when it comes to the Lebanese pound. This is something that we have extreme sensitivity on. IMF wants the market to decide what kind of Lebanese pound we have. We believe, in the government, the ministry of finance and the central bank, that keeping the Lebanese pound at 1,500 is the only stable way to move forward with these reforms. That is the only difference we have with the IMF. Why do we need a program, if you have a CEDRE program that allows you to invest in the infrastructure to put the country on the growth path. What we need to do is the structural reforms and the financial reforms that stabilize the country and that will build the platform to start investing in the country. And we have so many projects that are extremely available for any investor in the world to come and invest. At the airport, the ports, telecommunication. In oil and gas, for the first round, Eni, Total and Novatek won the bid. But for this round you have a lot of international companies that would love to come, you have the Qataris, the Malaysians, the Omani, the French, the Italians, maybe American companies are coming to invest in our oil and gas. So we are doing the reforms we need to do to stabilize the downfall we are going through. It is a difficult moment for Lebanon but we have a political consensus around this. This is what is important. If you want to go through an IMF program and we do not have political consensus, we will never reach the numbers. But if you have political consensus on the reforms that all institutions are telling you to apply, especially S and P, the IMF, Fitch, or Moody’s, they are telling you what you need to do in the country, and we are doing it, then why go to the IMF?

Question: It is tough though, isn’t it. At the end of the day, you have to convince the private sector. You can keep that peg as long as you want and Riad Salame has done an excellent job engineering that to make it a reality, but at the end of the day, you have got to get the private sector on board..

Hariri: Absolutely.

Question: And a lot of people in the private sector are very concerned about what’s been happening with the central bank

Hariri: Absolutely, the problem is what today? It is financial. In 2019, we took a lot of measures that will stabilize the deficit in our budget. We also have projects on privatization, whether the data center, the airport, highway roads, we are looking also at toll roads and trains. We are taking all of the private sector interests into consideration and we are talking to the private sector.

Question: What about telecoms, are we going to see that opening up? Because that could bring big money for this country.

Hariri: If it were up to Saad Hariri, I would privatize it tomorrow. But, since I have to have a consensus here, we will have to have a public-private partnership. And this is what we are discussing. In the coming two months, we will arrive to a decision and then we will take this sector to the private sector. We are taking advice from IFC, World Bank and others, so to see how to move forward.

Question: A lot of people in the private sector here look at Lebanon. The infrastructure is crumbling, this is an economy on the verge of collapse, they are worried about this peg as I mentioned, but as you say, there are opportunities, in terms of privatization. Give me specifics on what we are going to see

Hariri: You will hear very good news on the airport in the coming few weeks. We are discussing with the IFC how to take the airport private, how to do a public private partnership, this is something that has been ongoing since a year. In the coming few days they will finalize the numbers and present them to us, and we will agree on it in the government and then we will take it public, which means we will take it to the private sector to invest in the airport. This is one of the projects that are ready. The data center, we are still discussing with certain political parties, also that is ready, we will launch it this year. We need to show the people, the international community and businesses that we are serious about privatization. This is why we are going into corporatization of the port. Yesterday, we had ideas to take MEA public because it is making money, and the same for the casino and the Regie. So we are going down this road, we did not have the decision in the past because different political parties did not understand the severity of the problem we were facing. Now they understand and now they understand that they need to go towards this process.

Question: What about the poor in Lebanon, because at the end of the day we can galvanize the private sector and get them to invest money, but you have got to answer to constituents, you’ve got to answer to the poverty problem in this country, what about the poor because there isn’t a social safety net

Hariri: We have programs today that work on the poorest in Lebanon and this is in collaboration with Germany and Great Britain. They put a lot of money in this fund and we are working on a social program for all of these extremely poor people in Lebanon. Tripoli for instance is named the poorest city on the Mediterranean. So a lot of these programs are going into these cities, in Aakkar and Bekaa. You have almost 40 thousand families that need this kind of help. We reached about 15 to 18 thousand so far with our program and we want to reach the 40 thousand hopefully by the end of 2020 or mid 2021.

Question: And a social safety net, an ability for folks to have a second chance as they age, that the public system will take care of them.

Hariri: A pension fund you mean? We are doing the reform of the pension fund. It is finalized by the ministry of finance and we are working also with the world bank. We will pass it in the government and take it to parliament. You have the pension for the elderly, this is something that is extremely important. We are working with parliament very closely to finalize this. We should finalize it by the end of the year.

Question: Walk me through the challenges in your mind, to achieve what you’re trying to achieve, because at the end of the day, you are Saad Hariri, you are one man, one political party, you’ve got a lot of folks to keep happy in order to get all of these things done and accomplished. Who are the partners that we see, what are the challenges?

Hariri: The challenges are the region. We are not the only ones suffering. This global economy also is slowing down, because of the trade war that is happening, all of this is hurting also Lebanon. From another perspective, it also helps our deficit, our budget, because prices are going to go down. Oil is already down. So these things are good for us, but when it comes to growth, this is another problem for us, because we need people to invest in Lebanon. The challenge really is how do you manage a country with 1.5 million refugees. It’s a burden.

Question: Do you think the international community has a responsibility that they are not fulfilling?

Hariri: Honestly, they’re fulfilling part of it, I’m not saying they’re not fulfilling, but is it enough? The United Nations or the World Bank came out with a report that says that until 2017, the refugee problem cost Lebanon $17 billion. We only got $6 billion. It tells you there is a gap. This was in 2015, now we are in 2019, and you can imagine the cost is higher today, the problem is bigger today plus you have more tension.

Question: And do you believe these folks will ever be able to return?

Hariri: Oh, they will return. They have a country.

Question: But if they are in danger, they are not going to leave

Hariri: Of course, they are not going to leave. But the difference between them and the Palestinians is that the Palestinians don’t have a state to go to and there’s a huge sensitivity with Israel and all the baggage that comes with it. With the Syrians, yes there is a regime, and I believe that the regime eventually will be forced to have his people return into Syria, whether through the Russians, through an agreement between the Americans and the Russians. If you ask any refugee today in Lebanon, in Turkey, in Jordan or in Iraq, do you want to go back to Syria? They will say yes, but they’re afraid. As the Lebanese were afraid when we had the civil war, a lot of them came back, some of them didn’t come back. But I truly believe that the refugees who are in Lebanon will go back to Syria.

Question: Speaking of Lebanon in this context, when I speak to investors, people on the street, families that I know, there is fear there. What is your message to them? They are not just afraid of the regional situation, they are afraid the government does not have a handle on this

Hariri: No, I am confident that we have a handle on that. The problem we had in the past is that people did not realize the economic problem we have, they didn’t understand that we have to change the way we work. And this is what we’ve been saying since day one in 2017, and going to CEDRE. We Lebanese need to do these reforms, not because the IMF asked me, because I believe that we should change. I cannot have a commercial law done in 1953 and still work on it, and today we have startups and we want to make Lebanon a digital economy.

Question: To do that you have got to get the internet working…

Hariri: Yes, but we invested about $700 million for the platform for fiber optics and LTE and everything to prepare us to be a digital government, we started in 2017. By the end of this year we will have covered 30 % of the Lebanese territory in fiber optics, by next year we will have covered about 80% of Lebanese territories, and by 2021 we will have covered 100% of Lebanese territories. This is why I am saying, stabilize the country, our fiscal problems, invest in the infrastructure and prepare the country for the digital economy that we want to pursue, we want to also fight corruption, we have a real serious corruption problem.

Question: Let me ask you about that, you do indeed have a corruption problem, it is something that is discussed quite widely and very publicly, as we are mentioning it now. Are you willing to put together a commission? Potentially, that answers to parliament?

Hariri: Absolutely, we are ready to do everything and this is why in CEDRE we decided to issue four laws, to protect the whistleblower, to have a commission for anti-corruption in the government, a commission to prosecute those who are corrupt and also we nominated in parliament the high commission who will prosecute ministers, Prime Ministers and any member of the government, and we just did it a month ago. All the tools to fight corruption are there, now we have to make them function.

Question: So when we talk about corruption, it is a systemic problem, what’s the timeline there? It is part of the privatization, no doubt…

Hariri: Absolutely, everything that’s going to go through especially from CEDRE and on privatization, will have special committees following the transparency, from the creditors because in CEDRE we asked to have a committee to follow all these projects and asked that there is full transparency on these projects. On another hand, how do you get rid of corruption in a country like Lebanon, this is one of the hardest questions. All the political parties need to stop protecting on the basis of confessions and they need to let those who made this corruption pay for corruption, go to court and go through procedure. In the past, because we were so divided in the country, especially after the assassination of my father, nobody was willing in the country to let someone from their confession face justice. Now take the justice ministry, you have 10 judges who are going through prosecution because of corruption and this is the beginning

Question: Is it just a slap on the wrist? And you see them back in the job in a couple of years

Hariri: No, these people are going to be fired. We had a law that formed a committee to prosecute employees in the government. This committee was made in 1955, it has never stopped one employee. Since this new government was formed, we stopped 17 employees and we are continuing the process. It is going to take time. But what helps fighting corruption is having a digital economy, having e-government, because the problem is this Lebanese citizen is going from one place to another place with his papers to get things done. If you have an e-government, you will catch all the corruption that is there. We are at the beginning but I truly believe that by the end of 2021 or 2022 we will have gotten rid of a lot of corrupt people.

Question: What about the percentage? What are we saying, cut corruption by half? By 2020?

Hariri: I hope, more, I think we should cut corruption by 60%, 70% in a few years with the work that we are doing, I think we are going to get there.

Question: I am going to hold you to those numbers…

Hariri: Come back and ask me about it and I will tell you how many people are in jail

Question: Walk me through your partners when it comes to the international community. Lebanese and foreign investors say there is a lot we could do but the political situation is no doubt tied to the geopolitical situation. And when we talk about the situation in Syria, in Israel, in the Middle East generally, who do you see as your partners in this region?

Hariri: I should see everyone as a partner in this region, if I want to be purely focused on the Lebanese interests. There are differences in the region, with Iran, and what’s happening between Iran and the world and all that. But it doesn’t mean if there are changes in this whole process that Iran shouldn’t be a partner, or we will find partnerships between the Gulf and Iran eventually. My problem with this whole issue, and I am going to be very blunt, is that in the Arab world, we are too busy fighting each other instead of focusing on what really matters, the citizen. That’s one. Two, I find that these wars today are economic wars. What is happening in this region is out of fashion, crazy and outdated. What we need to do in this Middle East is focus on our potentials and what we can do and what the Arab world can do. This is where I commend what President Sisi is doing, in Egypt, what MBS is doing in Saudi Arabia. If you take the case of Egypt, how much Egypt is working on its economy, how much reform they are doing, how much they did in electricity, this is what we need to do.

Question: So often, folks would say, and quite rightly, that has come at a huge cost for the public, the reforms and how that’s impacted, they have had to devalue the currency there. But also human rights, to do that you’ve got to be a strong man, that’s what we see in Egypt and that’s what we see in Saudi Arabia.

Hariri: That’s why we have to find the balance here in Lebanon, we cannot do this like everywhere else. I believe in Lebanon we have this special equilibrium between confessions. People think there are majorities and minorities, we are all minorities in the country, Muslims are minorities and Christians are minorities and this is how people should think. But I truly believe the problems here in this region are the tensions we have. If I look back to end of 2016, when we forged this new alliance and consensus, it was very unclear waters that I was walking into, but today, I truly believe that everyone is conscious there is a problem and everyone wants to take action, the issue is how to combine all our efforts in one big package of reforms, that will cover all the things we need to do. It’s going to be tough but it’s worth the time, the hours, the risk. We will have demonstrations in Lebanon, I’m saying it now, but let’s have it one time, and that’s it, fix it.

Question: What is the haircut going to look like? Because you are saying you’re not going to devalue the pound, what does this mean for the average Lebanese? How hard is this going to be?

Hariri: For electricity, we usually pay $2 billion in subsidies, we decided yesterday in the presidential palace that we will pay $1 million. And we have to live with this $1 billion of subsidies. If we don’t reach our goal by the 2nd or 3rd quarter then we will have shortage of electricity. We cannot borrow more, full stop, this is what we have to do. When it comes to taking decisions on privatization, telling the private sector that we are ready for airport, ports, telecoms, data center, the private sector will have the platform it needs, it will have to grow the economy itself. While they do all the austerity program, you have one big benefit that is there which is CEDRE, from one side you are doing an austerity program in your budget, on the other side you have all these projects from CEDRE where for each billion dollar you spend in this country that’s 1% growth. So, If we do CEDRE like were supposed to then there will be growth and this austerity program will go in parallel.

Question: How soon are you going to be able to unlock that money in terms of that $11 billion in commitments?

Hariri: (The French envoy) Duquesne is in Lebanon. Tomorrow I will be meeting with him to finalize the last touches. I will be going to Paris, also to Germany, also to Abu Dhabi to finalize agreements between Lebanese government and the Emirati government, also to Saudi Arabia to finalize agreements.

Question: The Saudi Finance Minister told me he is committed to Lebanon all the way, but that money isn’t here yet, you’re going to get it?

Hariri: Yes, we are going to get it. We want them to invest in Lebanon and we want Lebanese also to invest in Saudi because we have a lot of capital also. You have the Lebanese diaspora that is all over the world and they’re willing to come and invest in Lebanon but they need the right stability and the right reforms, if they see that we’re doing all of this then it’s only a matter of time before they come and turn the wheel around.

Question: You are not in a position in Lebanon to do what Sisi or MBS would do, but you also have to contend with geopolitical issues. How tough is it for you, when you have the USA, which is in many ways a partner of Lebanon, strong-arming the regime in Tehran and creating, according to many folks I speak to in the GCC, a myriad of problems in the Persian Gulf, that has an impact on oil prices, stability, potential for growth in Asia? Because this is a problem that is local, this is happening here at home.

Hariri: The only thing about all this that scares me is a war

Question: How close are we to that?

Hariri: I do not know, and I do not think anybody wants war.

Question: Is it a possibility?

Harir: It’s a possibility, like any other possibility, but I think it’s a smaller possibility than going to talks, because I believe President Trump wants to talk, and I believe the Iranians want to talk and I believe the gulf wants to end this.

Question: Because they realize the US is not going to back them up if they go after Iran..

Hariri: In the end, people want stability, countries need stability. For us in Lebanon, the challenge, like you said, when we were divided, was extremely hard, but we elected President Aoun, it broke all the alliances that we had in the past, it just molded Lebanon into new alliances. Today they all realized one thing, if we do not do the reforms, regardless of the regional problems, regardless of regional backups and friends, we have to do it ourselves, this is what’s good. They understand that we need to do these steps.

Question: When I speak to investors, those here in Lebanon, they live here in the country, they believe in this country, they are hopeful about this country, but they are not willing to invest. They say Lebanon does not need external enemies, because its greatest enemy is the Lebanese

Hariri: Absolutely, I totally agree with them. That is the main problem that we have.

Question: So your greatest enemy is yourselves?

Hariri: Yes, absolutely, and sometimes it hurts me when I see other people talking about Lebanon, from different nationalities, and how much they love Lebanon and how much they cherish Lebanon and I see what we do in our own country. You know, Lebanese have been through civil war, through Syrian regime occupying Lebanon, the assassination of my father and I think truly, in the past 3 years, it is the only time we have been running the country by ourselves, figuring things out by ourselves. I truly believe the past month and a half, especially when we were following S and P and Fitch and we were working really hard not to be downgraded with Fitch and S and P, we were really are confident that these reforms are going to be made because people realize today more than ever that we cannot continue the same way.

Question: What would you say to private investors?

Hariri: Investors need to see real steps taken.

Question: And they are going to see that? How soon?

Hariri: Soon, this is why I am saying the meeting yesterday was extremely important. We will present the budget next week to the government and we will start working and in 2-3 weeks send that budget to parliament. And in that budget, there will be a lot of reforms, and a lot of laws that follow these reforms. S and P gave us six months, and we are going to use these six month to pass every single reform that we should pass in Lebanon. I ask investors to sit and watch us. You will see, like the S and P gave us this chance, I tell them give us this chance. I am confident we will reach those numbers.

Question: You were just in Washington, you had a series of meetings, Secretary Pompeo and his wife paid you a visit at your home. What were some of the agreements you walked away with, what did you achieve out of those meetings?

Hariri: When I travel, I always try to present Lebanon’s case. Lebanon is one of the smallest in the world, 18 confessions, 1.5 refugees with a population of 4.5 million. When I watch TV sometimes, and I watch Europeans fed up of refugees or the United States is building a wall and I look at myself and my country and I laugh. We received 1.5 million and you are reacting like this. People have lost their humanity. These are people, babies and children, people who ran from war. They should not be used in politics for populist movements.

Question: And the president says build a wall?

Hariri: Ok, this is their policy. What I am saying is what I think. We have 1.5 million refugees in my country and I don’t want them to stay. But Lebanon is suffering all of this and yet we are going to make these reforms and we are going to reach them. The biggest problem that I have is the region, and the global economy that is slowing down and everybody is saying that there is a recession that is going to come, which doesn’t help, but I truly I truly believe that we are going to make all the right steps.

Question: Many would say that the president of the United States is to blame for this potential recession

Hariri: Well, everybody wants to blame everybody, I think the president is doing what he thinks is best for his country. I am not here to blame him

Question: And you are worried it’s going to hit Lebanon

Hariri: I think that people should realize that Lebanon is part of this world and we are doing what we can given the 1.5 million refugees. How do you manage a country with 1.5 million refugees, you are doing a public service for the international community because if I were to be a populist, I would say here is the sea, go here, go there, and I wouldn’t have the problem that I have today. But we are not like this.

Question: So the United States has put Lebanon’s financial health and the financial sector in the crosshairs, by targeting banks that they say is running Hezbollah money. Doesn’t that make your job difficult?

Hariri: It does make my job difficult but also, Americans have been very clear about this. If a bank plays in those waters, they should expect the consequences of these actions. It is not only America, Europe has the same rules, everybody has the same rules, when it comes to Hezbollah money or to money laundering or whatever it is. If a bank misuses this trust.. We don’t like it, definitely, we try to stop it, I tried to stop it, I tried to delay it.. But rules are rules and they had to take this action. I don’t like it but I wish this bank didn’t go through what they did.

Question: There are big questions in the mind of investors about Hezbollah and the fact that they seem to be operating autonomously from your government, yet your government will pay the price for their actions. How do you respond to that?

Hariri: Look, Hezbollah is not a Lebanese problem only, it is a regional problem. If Israel wants to have this scenario, where Lebanon is responsible… all what Netanyahu says, and you want to buy it, buy it. But he knows and the international community knows that this is not true. We do not agree with Hezbollah on these actions. I do not agree with Hezbollah on these actions.

Question: But can you stop it?

Hariri: But at the same time, I am a pragmatic person, and I know my limits and I know the limits of this region. If people were serious about this issue, they would have done things 10, 15, 20, 30 years ago. Now maybe they started to do something, it isn’t my problem that Hezbollah became this strong, it isn’t my fault that Hezbollah became this strong. But to tell me that Hezbollah is running the government, no, Hezbollah is not running the government. Sorry, we are running the government, I am running the government, President Aoun is running the government as President, Nabih Berri as speaker of the house. They are a political party, they have their size in the government and parliament. They do not run the country but what they control is maybe a flare or a war that might happen for regional reasons in which we have no say in Lebanon. This is that big quarrel between us and them, and this is where I say, what do I do as a prime minister, do I sit and fight Hezbollah day and night on this issue, or do I make all these reforms that I need for this country, strengthen my institutions, strengthen my LAF, my ISF, my central bank, all my security forces, make a strong central government. At the same time the president has decided to open a strategic dialogue on how to defend Lebanon from any intrusion, or wars, and we sit at the table and discuss things calmly. This is an issue that will take time, people will say that this dialogue will not to lead to anything, maybe in the beginning it will not lead to anything, but I can assure you in the end it will lead to something.

Question: Investors are funny when it comes to risk. Some risks are worth taking, is Lebanon a risk worth taking?

Hariri: Definitely, because we have in our DNA entrepreneurship. The Lebanese, wherever you find them, do well. We have this entrepreneurship in ourselves, we have new startups, 1,500 intelligent young men and women who are doing an amazing job for technology. We have so much potential, all we need to do is do the reforms we need to do, renew our laws, prepare the platform for the technology sector.

Question: One member of the Lebanese community who has done extremely well globally and has been a great friend to Lebanon, Carlos Ghosn, finds himself in a world of trouble and a world of pain right now. What is your commitment to him?

Hariri: We are following the case, I talk to his family, they have lawyers, they are taking care of this. And anything they need from us, we will do. I think this is a legal case in japan. The Lebanese government cannot do much about it, we can give support to the family, we can talk to the Japanese government but at the end of the day, this is a Japanese issue that his lawyers are dealing with. We support him, we hope that he gets out as soon as possible

Question: Are you concerned by the way that this case has gone? Quite irregular?

Hariri Yes it is, but you know, as Prime Minister of Lebanon, I will rest to say, let’s sit and watch and see where it goes.

Question: Finally, sir, your late father was very well known within the business community as being someone whose word was his bond and if he said to trust him on something, investors knew that he was going to get it done. How would respond to those who say, the son isn’t the father?

Hariri: Of course the son is not the father. My father was someone who achieved a lot in his life, he was nothing he became a billionaire, he worked very hard. My circumstances are different, I had this father who was there for me and then all of a sudden he was not. He was assassinated. What is expected of me is to be like him. I try, very hard, I never say that I am like him, I try to go by his legacy, and to solve issues in the country by how he used to think, and my father’s ideology was in order to get things done you need to make alliances in this country. What I did is the same thing. In the past he worked with Hezbollah, even when the Syrian regime was here, he worked. The difference was, when he got assassinated, the country got divided. That was the biggest problem. How do you break this division? In 2017, we broke this division and now we are progressing towards a better Lebanon.

Question: How do you think he would feel about the situation today?

Hariri: If he were here and saw the region like this, he would be very disappointed. Because before his assassination, we did not have civil wars, it’s a totally different region, the alliances are different, the tension is so high. This is due to unsolved problems and we are not sitting at the table and solving them among each other.

Question: Any more pessimistic or optimistic?

Hariri: Optimistic

Question: In spite of everything that you’ve just said?

Hariri: The region is going through a tough time, yes, but I think this tension at its peak, and as of now you’ll start seeing it settle. I hope.

Source: National News Agency

The president of the Council of Ministers Saad Hariri said that the political consensus that we now have is very important and will allow Lebanon to implement the necessary reforms. In an interview with Hadley Gamble on CNBC, Hariri added: 'Standard and Poor's gave us six months, and...