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Wednesday, 22 January 2020

The roots of Lebanon’s crisis

Vociferous protests in Lebanon may target the denominational system, but it’s really corruption that needs to be rectified, writes Hassan Al-Qishawi

Hassan Al-Qishawi , Tuesday 22 Oct 2019
The roots of Lebanon’s crisis
Demonstrators carry national flags and banners during an anti-government protest in downtown Beirut (photo: Reuters)
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Lebanon is in the midst of one of the most perilous crises in its history. The country that experienced a short civil war in 1958 and then a gruelling 15-year-long civil war that began in 1975 has never been gripped by such a severe economic crisis. In an attempt to offset a crippling budgetary deficit, the government imposed a number of taxes, one being a tax on WhatsApp calls. The measure triggered a tsunami of grassroots protests demanding not just the resignation of the current government but the end of the entire denominational system of government which demonstrators maintain is what brought the country to its current straits.

Remarkably, some protesters have called for the army to take over. Such is the degree of loss of public trust in politicians.

While the Lebanese people’s anger against their political leaders is understandable, the cries for the “fall of the regime” or even just the resignation of the current government are unrealistic and only threaten to aggravate the economic crisis. A political vacuum is the last thing the country needs at a time of a severe currency crisis when the informal lira to dollar exchange rate is soaring. Virtually the entire Lebanese economy depends on a stable exchange rate and high interest rate in order to attract foreign investment, which become assets in Lebanon’s banks that, in turn, lend money to the government.

Despite the dangers, many politicians and political factions are scrambling to ride the wave and turn public sentiment against their political adversaries. Druze leader Walid Jumblatt has called for the resignation of Foreign Minister Gebran Bassil, President Michel Aoun’s son-in-law. He also hinted at the need for new general elections with no sectarian restrictions.

The ministers of the Lebanese Forces Party, led by Samir Geagea, resigned from the government, which observers have interpreted as an attempt to flee a sinking ship.

Supporters of President Aoun claim that he champions the protesters’ demands.

Lebanon has just had legislative elections. It is doubtful that new ones would yield a significant change in the country’s political makeup. At most there would be a limited redistribution of parliamentary seats, while the elections themselves would cost billions.

As for the abolition of the denominational system of government which is at the root of most problems, that could not be accomplished by a 15-year-long civil war. Also, it took a very long time to form the current government, despite the rare moment of political consensus in Lebanon’s history. Nothing would be gained by the resignation of the government, which would only create a governmental void that could last months, and moreover when urgent decisions are needed to rescue the economy.

Therefore, it would be better for the solution to come from the current government. But this requires a change in approach. The government needs to be firmer in the fight against corruption and the measures it takes to rescue the economy must not come at ordinary people’s expense.

Fighting corruption is admittedly a huge challenge in Lebanon. In the event of any questioning or attempt to make them accountable, political elites invariably seek refuge in sectarian fortifications. The effect is to deflect accusations or paint them as slurs directed against the religious community as a whole.

Given the complicated nature of the political system and the popular rejection of any further tax burdens, the decisions announced by Prime Minister Saad Al-Hariri on Sunday seem reasonable. The solutions may not be radical, but they are feasible.

On 20 October, it was announced that the Hariri government had agreed on a package of reforms intended to alleviate the economic hardships that fuelled the countrywide protests that erupted last week. Last Friday, Al-Hariri, who heads a government steeped in sectarian and factional rivalries, gave his “partners in government” a 72-hour deadline to reach an agreement on reforms. He hinted at the possibility that he would resign if they failed.

The reforms, announced Sunday, include a 50 per cent cut in the salaries of current and former presidents, ministers and MPs. They also call on the Central Bank and private banks to contribute $3.3 billion to achieve a “near zero deficit” in the 2020 budget. There is also a plan to privatise the telecommunications sector and to completely overhaul the dilapidated electricity sector. These measures have long been demanded by foreign donors as a condition for unlocking $11 billion in aid. The reform bill also called for the creation of a body to supervise the implementation of reforms.

Alluding to the proposed tax on WhatsApp calls that triggered the wave of protests last week, government officials stressed that the measures do not include any additional taxes or fees.

According to Lebanese news reports, the Hariri economy paper includes abolishing a number of assistance funds and imposes a 25 per cent tax on banks and insurance companies. It also rescinds decrees reducing pensions for retired army and security personnel.

The media also reported that the “economic paper” revoked all increases in VAT, telephone and public service taxes, abolished banking confidentiality on the accounts of MPs, ministers and other government officials, and set a $10,000 upper limit on judges’ salaries. The reforms also call for the privatisation of the mobile phone sector, a hike in taxes on banking profits, increased custom taxes on imports of goods and products that are produced locally, and the promulgation of a “law for the recuperation of embezzled moneys”.

Commitment to and implementation of “meaningful reforms could open up billions of dollars of international support for Lebanon”, a US State Department official said Sunday. Donor countries have long pressed Lebanon for genuine economic reforms and a resolute fight against corruption. However, taking the necessary decisions was never easy in this country which is plagued by institutional weakness and political and sectarian fragmentation.

*A version of this article appears in print in the 24 October, 2019 edition of Al-Ahram Weekly.

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