Lebanon’s finance dilemma

Bassem Aly , Tuesday 22 Sep 2020

Disagreements over who will lead the Finance Ministry in Lebanon have complicated talks on forming a new government

Lebanon’s finance dilemma

Political and religious figures in Lebanon issued statements this week reflecting the difficulties the country is experiencing in forming a new government.

Shia political forces, mainly Hezbollah and Amal Movement,  insist on choosing a Shia figure for finance minister, which is oposed by many of the country's politicians and religious figures.

An initiative that France backed on Wednesday, Lebanese Sunni leader Saad Al-Hariri suggested an "independent" Shia cadre to lead the finance portfolio, but the crisis remains unresolved.  

Such developments coincided with an explosion in the southern Lebanese village of Ain Qana on Tuesday. The Iran-backed, Shia Hizbullah groups has a grip on southern Lebanon, and the politico-security implications of the blast—though resulting in no casualties so far—are yet to be seen, especially after further details about it are revealed.

Newly-appointed Prime Minister Mustafa Adib said that “Lebanon doesn’t have the luxury to waste time amid the unprecedented crises it is going through,” adding that he would cooperate with Lebanese President Michel Aoun in finalising the new cabinet lineup.

Adib, a former diplomat, believes that Lebanon needs a new government to “halt the ongoing collapse and start work to get the country out of its present crisis.”

In a statement that drew the attention of most regional and international media outlets, Aoun said that Lebanon was heading “to hell, of course.” Aoun, a Christian, and an ally of the Lebanese Shia Hizbullah Movement, warned that the “entrenchment of positions” had made “no solution seem imminent.”

Even Patriarch Bechara Boutros Al-Rai, the country’s senior Christian cleric and leader of the Lebanese Maronite Church, stepped in by indirectly criticising the insistence of Shia political forces in the country in choosing a Shia figure for finance minister, which represents the main reason for Adib’s failure to create a new coalition government.

“In what capacity does a sect demand a certain ministry as if it were its own and obstruct the formation of the government until it achieves its goals and so causes political paralysis,” Al-Rai demanded.

He noted that the Taif Agreement, which ended the country’s civil war in 1990, did not stipulate that specific ministers should be members of specific sects. Al-Hariri and Druze leader Walid Jumblatt strongly backed Al-Rai’s position and opposed that of Hizbullah and its Shia ally the Amal Movement.

On Twitter, Al-Hariri, a former prime minister, said that “rejecting the idea of switching the control of ministries was frustrating” as it served as the “last chance to save Lebanon and the Lebanese people.”

The leader of Lebanon’s Sunni Muslim Future Movement, Al-Hariri has a history of tensions with Hizbullah. He resigned as prime minister in October 2019 amid protests against all the country’s political forces due to the deterioration in social and economic conditions in Lebanon.

Al-Hariri, who enjoys good relations with many Western and Arab states, then refused to lead a new cabinet following disagreements with Hizbullah. Hizbullah and Aoun backed Hassan Diab, who was in power when August’s port blast in Beirut took place, as the country’s new prime minister at the head of a coalition government in December 2019.

Al-Hariri’s Future Movement, the strongly anti-Hizbullah Christian Lebanese Forces Party, and Jumblatt’s Progressive Socialist Party did not join this government, however, and Diab’s coalition faced strong opposition from the Gulf countries and the United States, mainly because it enjoyed the support of Hizbullah.

Following the Beirut explosion, many countries offered their financial backing to Lebanon. But quick reforms were demanded by the United States, the European Union and others in return of maintaining their financial support.

Jumblatt believes that French President Emmanuel Macron’s initiative for Lebanon, involving returning to talks with the International Monetary Fund (IMF) over new financial packages in return for a new government, could be the “last opportunity” for the economically-suffering state.

“It appears that some did not understand or did not want to understand that the French initiative is the last opportunity to save Lebanon and to prevent its disappearance, as the [French] foreign minister said clearly,” Jumblatt tweeted.

Imad Salamey, a professor of political science at the Lebanese American University, told Al-Ahram Weekly that ending the crisis would depend on what kind of guarantees and assurances were given to the different parties joining the government.

If, for instance, the Shia ministers in the government were handpicked by Hizbullah and Amal to constitute with other allies at least a one-third stake in the government including major ministries, then the choice for the Finance Ministry would no longer be so crucial.

“Alternatively, the prime minister may need to provide assurances whereby any appointed non-Shia minister of finance would consult and guarantee the tacit approval of Shia ministers or the Shia speaker of parliament in signing legislation or decrees. Hence, I think the sticking point remains of whether the March 8 camp that controls the parliamentary majority will accept a government dominated by a parliamentary minority while being backed by France and the Western states,” Salamey said.

He noted that the French initiative and US pressures appeared to be undermining Christian support for Hizbullah, which enjoys a parliamentary majority, including that of Aoun.

Sarah El-Richani, a professor of mass communications at the American University in Cairo, referred to the regional context, specifically the recent US sanctions on Hizbullah figures and companies linked to it. She argued that Hizbullah and Amal’s insistence on the “strategic” Finance Ministry was likely being used as a “bargaining chip to ease US pressure on Hizbullah”.

“It [the United States] is also pressuring France and other European countries to deem it a terrorist organisation. This ‘new’ insistence on this ministry could also be linked to impending sanctions on Iran. Easing the pressure on Hizbullah and Iran would probably see the resolution of the impasse in Lebanon,” El-Richani explained.

Earlier in September, Kassem Hachem, a key figure in speaker Nabih Berri’s bloc in parliament, was reported as saying by Reuters that Berri had insisted that Lebanon’s new finance minister be Shia, as has been the case previously due to Lebanon’s sectarian power-sharing system.

Hachem said that Berri, the Amal leader and Hizbullah’s major ally, had expressed his stance in a phone conversation with Macron. Berri refused to join Adib’s government due to “domestic problems”.

Steve Hanke, a professor of economics at Johns Hopkins University in the US, said that the “epicentre” of Lebanon’s economic crisis was a currency crisis that “has spawned the first hyperinflation that’s ever been experienced in the Middle East region.”

“This occurred in July, when I measured the monthly inflation rate at over 50 per cent per month for 30 consecutive days. Therefore, the first problem that must be solved before Lebanon can establish stability and proceed with numerous necessary reforms is the institution of a currency reform that smashes inflation. To do this, a new finance minister must embrace and install a currency board system,” Hanke said.

Believing that Hizbullah “does not possess the economic vision that is required for a first step to stabilise the economy,” Hanke argued that a currency board system be instituted as the “only way for Lebanon to unlock foreign assistance, which is waiting for reform, and that would, in fact, stabilise the economy.”

The Lebanese crisis is linked to severely deteriorating social and economic conditions. The Beirut explosions left 200 people dead, 6,000 injured, and 300,000 homeless, and came against the background of the country’s long-running rubbish crisis, continuous power cuts, and increases in the prices of basic goods.

*A version of this article appears in print in the 24 September, 2020 edition of Al-Ahram Weekly

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