A recovery in Lebanon: Arab help needed

Haitham Nouri , Tuesday 14 Sep 2021

Now that a new government has finally been formed, Lebanon is hoping to restore its political and economic balance with help from larger neighbours

Arab help needed

Lebanon formed a new government after 13 months of political feuding and economic meltdown, exacerbated by the Beirut Port blast of August 2020.

The names of the cabinet ministers generated heated debate in public and political circles. Although, as per the demands of the people the majority of the ministers are not veteran politicians, they were still nominated by traditional sectarian political factions, rendering them one way or another affiliated to these forces.

“We can’t have an all-technocrat government without the ministers having affiliations,” said the new Prime Minister Najib Mikati, indicating that there has to be political consensus to back up the crucial decisions that need to be made.

Maged Harb, a Lebanese university professor and journalist, said “it is difficult to find Lebanese figures who don’t have political or sectarian affiliations. Besides, negotiating with the IMF can’t take place without consensus among political powers. The IMF wants Lebanon to float the national currency, the lira, which means the dollar will be traded for 16,000 liras, which is its price on the black market.”

The dollar’s​​ price fell in Beirut with the announcement of the formation of the government from 17,000-17,8950 liras to less than 16,000 liras. The Lebanese press attributed the drop to the optimism the long-awaited development induced.

“The IMF also demanded subsidies be lifted. This has already taken place – only 10 or 10 per cent of goods are subsidised. The fund wants to stabilise the wages of government employees, which means many workers will have to leave their jobs in the public sector. This will lead to downsizing government administrations and decreasing their financial allocations,” Harb stated.

Lebanon has been seeing unprecedented political disturbances since 2019 when thousands of people went out on the streets to protest the government’s decisions to raise taxes on telecommunications. The people demanded the fall of the political elite, leading the government of Saad Al-Hariri to tender its resignation.

Many attempts to form a government had failed until Hassan Diab, a university professor, rose to the helm in January 2020. Diab’s government was rejected by the Lebanese Sunni community on the grounds that its head was more inclined towards the Iranian-backed Hizbullah.

Since then, Lebanon had lost the “support of the Gulf”, which rejected Hizbullah’s control over Beirut, Harb said. 

Seven months later, the Beirut Port turned to rubble, deepening the political and economic crises of the country. Governmental and political corruption became more widespread. In the words of Harb, the corruption of the political elite stood in the way of development in all sectors.

The spread of the Covid-19 pandemic further crippled Lebanon, pushing its health sector to the precipice of collapse. During this period, the Lebanese currency lost about 90 per cent of its value, and the prices of goods rose by over 500 per cent.

For example, the increase in the price of sunflower oil recorded 1,391 per cent, sugar 1,232 per cent, meat 966 per cent, poultry 374 per cent, eggs 787 per cent and milk powder 334 per cent. The price of rice rose by 869 per cent, butter by 725 per cent and other dairy products by more than 500 per cent. Vegetable price increases ranged from 550 per cent to 700 per cent, while increases in fruit prices reached 500 per cent, according to Crisis Observatory, a research centre at the American University of Beirut.

Lebanon has also been engulfed by critical fuel shortages in the past few months. Vehicles would line up for long hours at petrol stations while the government failed to buy any form of petroleum, rendering the electricity crisis more acute and causing irreparable damage to hospitals.

Egypt, Syria, Jordan and Lebanon are currently engaged in talks to deliver Egyptian gas to Lebanon, a move described as one of Cairo’s leading roles in the past years.

“Cairo and Beirut may seem like they have not had strong relations for decades. But former Egyptian president Hosni Mubarak visited Beirut following the Israeli aggression. Egypt has also participated in building Lebanon’s power plants and extended an air bridge to supply Beirut with medical assistance. And now, Egypt’s gas is topping the agenda of international negotiations,” Harb stated.

“Inserting Syria into the equation is an amendment to the Caesar Act through which the US has been imposing sanctions on Damascus and capitals doing business with it. The US-European consensus over exporting Egyptian gas to Lebanon has provided solutions for both Damascus and Beirut,” he added.

Hizbullah announced Iran may deliver oil to Beirut. However, exporting Egyptian gas to Lebanon via an existing infrastructure – that requires upgrades and maintenance – can delimit Iran’s role in Lebanon and is an indication of the re-emergence of an Arab role to counter the influence of Tehran and its ally, Hizbullah.

When the government was formed, Mikati said he would “ask for the help of my brothers in the Arab and GCC countries”.

“Arab support was one of the main reasons behind the quality living conditions in Lebanon, be it through Arab tourism, Gulf deposits in Beirut banks or investments in Lebanese real estate,” said Harb.

Lebanon saw a series of crises, the third worse – according to the Crisis Observatory – being the emigration of the Lebanese. The first wave of emigration was in the wake of the Mountain War between the Maronites and the Druze in 1860 until World War I, which saw 330,000 immigrants leaving Lebanon. The second wave was during the Civil War of 1975-1990 when about a million people left the country.

Exacerbating the emigration crisis is the general state of pessimism. According to the World Bank, it is going to be between 12 and 19 years before Lebanon restores its GDP to the 2017 levels if the political will for reform is absent.

Harb believes controversy will surround the appointment of Finance Minister Youssef Khalil who is claimed by many to have close ties with the governor of the Central Bank. The latter has been accused of causing the current crisis, especially the inability of depositors to withdraw their savings, the reduction of subsidies and the inability to purchase fuel and medicine.

The labour minister is being criticised for his ties with Hizbullah. The group insisted on snatching this portfolio, expected to oversee infrastructure operations.

According to a Lebanese source who preferred to remain anonymous, Al-Hariri had strongly insisted on not giving the Labour Ministry to Hizbullah because the move would drive Gulf investors away.

Egypt is slated to play a major role in the Lebanese infrastructure sector, Harb said, due to its “vast experience in expanding infrastructure networks quickly and at a reasonable cost”.

Whatever the case may be, Lebanon needs serious reform to eradicate corruption. Political neutrality is also critical for the appeasement of Western and Arab investors and for the country’s speedy return to normality.

This, however, will not materialise without conducting general elections, which are slated for next year. The elections will shed more light on the balance of power in Lebanon and their results will determine how much international donors will help the country.

When Mikati was head of government for the first time in 2005, he successfully managed to organise elections. He refused to nominate himself to ensure neutrality. Today, many are pinning their hopes on Lebanon’s wealthiest man succeeding again.

*A version of this article appears in print in the 16 September, 2021 edition of Al-Ahram Weekly

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