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Wednesday, 12 August 2020

Lebanon on the brink

With the protests in Lebanon now extending across the country and involving government supporters, many are asking whether the country is nearing collapse, writes Hassan Al-Qishawi

Hassan Al-Qishawi , Tuesday 16 Jun 2020
Lebanon on the brink
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Lebanon this week seemed closer to economic and political collapse than at any other time in its recent history, with the streets still in uproar at the national currency the lira falling to 6,000 to the dollar compared to an official rate of 1,507.

 The momentum behind the reforms proposed by the government of Prime Minister Hassan Diab is losing strength, and the International Monetary Fund (IMF) seems likely to reject its reform plans and refuse to assist Lebanon due to an anticipated veto by the US.

The US is the largest contributor to the IMF and has the largest share of the votes on the organisation’s board at 16.51 per cent. It has a long history of refusing assistance to countries it deems to be “sponsors of terrorism,” and although Lebanon is not officially listed as a terrorism sponsor, the Lebanese Shia group Hizbullah, which controls much of Lebanon behind the scenes, is listed by the US as a terrorist group.

Compounding the dire economic situation in Lebanon is the US Caesar Act that imposes sanctions on Syria and anyone dealing with its government. This adds additional burdens to Lebanon since it is closely tied to Syria, and Hizbullah and the Shia group Amal, and to a lesser degree Lebanese President Michel Aoun, have ties with the regime of Syrian President Bashar Al-Assad.

Supporters of Hizbullah and Amal in Lebanon have organised sectarian demonstrations, and in response Sunni Muslim protesters took to the streets to condemn what they said were Shia attempts to defame the Prophet Mohamed’s wives. Once this sectarian wave subsided, Hizbullah and Amal supporters redirected their protests against governor of the country’s Central Bank Riyad Salameh.

They blame him for policies that have led to the crisis and for failing to halt the collapse of the lira.

The demonstrations peaked last Friday in Tripoli and Beirut, despite the government announcing that it would take emergency measures. The clashes began in Tripoli, the second-largest city in Lebanon, after demonstrators blocked a highway to prevent trucks loaded with goods heading to Syria.

The UN World Food Programme issued a statement on Twitter on 13 June clarifying that the trucks blocked by the protesters in Tripoli were carrying food aid to UN storehouses in Syria.

The protesters also threw rocks at a building belonging to the Central Bank, which was eventually consumed by flames. The police responded with tear gas.

Prime Minister Hassan Diab, whose government is seen as being propped up by Hizbullah, condemned the violence, saying it was part of a “coup attempt against the government” and part of the “manipulation” of the lira.

He said that “the state and people are being blackmailed” and vowed to end corruption in the country. He demanded “all agencies to arrest anyone who has participated in these crimes, whether in Beirut or Tripoli or anywhere else.”

“These hooligans are fixated on sabotage, and their place is in jail,” he said.

Diab said that what had happened to the lira over the last ten days was unfathomable. “We took decisions and measures,” he said. “Around ten million dollars were pumped into the market in just two days, but on the third day all this had vanished. This is inexplicable, and it indicates that someone is manipulating prices.”

“I have said before and I will say again that toying with the livelihood of the people is unacceptable,” Diab said. “The salaries of civil servants and the army will be worthless if prices continue to rise. Our responsibility is to protect people’s incomes, and we want a full and comprehensive investigation. It is impossible for there to be a crime without a criminal committing it.”

The Lebanese government has instructed the Central Bank to pump dollars into the market to offset the collapse of the lira. It is acting against “stock exchange manipulators” and “currency smugglers” and is forming a crisis cell headed by the finance minister to monitor financial and monetary developments.

In March, the government defaulted on paying foreign debts worth $31 billion, and losses in the financial system could reach $60 billion. The Central Bank is quickly depleting its reserves, and it may soon run out of the dollars needed to pay for imports.

Lebanon imports 80 per cent of its consumption goods, and floating the currency has fuelled inflation, stripping most Lebanese of their purchasing power.

The lockdown imposed since 15 March due to the Covid-19 has accelerated these problems. With companies deprived of credit and demand collapsing, 20 per cent of the Lebanese workforce have lost their jobs. As the lockdown is lifted, more employees, previously furloughed, are likely to find their companies closed and their jobs gone forever.

 

*A version of this article appears in print in the 18 June, 2020 edition of Al-Ahram Weekly

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