No end in sight to crisis in Lebanon despite new government 

While a new government was formed in Lebanon this month, the country has gained no respite from the ongoing economic crisis. The new prime minister is seen as part of the existing political system, viewed as corrupt and inefficient

October 01, 2021 by Abdul Rahman
Lebanon crisis
President Michale Aoun (C) with prime minister Najib Mikati (L) and members of the new government in Lebanon. (Photo: NNA)

After being ruled by a caretaker government for over a year, a new government was finally established this month in Lebanon. Prime minister Najib Mikati is leading a 24-member cabinet that was approved by the Lebanese parliament on September 20. However, his political background and proposed policy approach has given little hope to the Lebanese people for any respite from the ongoing economic crisis in the near future.  

Mikati wants to prioritize economic recovery with the help of international financial institutions and countries such as the US, which are asking for further withdrawal of the state from the economy. He has not expressed intention to address the concerns about the country’s political system that have been raised by the popular protests in the last two years, and widely considered to be the root cause of the problems faced by Lebanon. On both economic and political fronts, Mikati’s approach would seem contrary to the popular will.      

Prime minister is part of the problem 

Following the appointment of Mikati as prime minister, the Lebanese Communist Party (LCP) commented that the new dispensation is identical to the previous government, and is a part of the problem not the solution. 

Mikati was first appointed as prime minister in July, and is a member of the current parliament representing Tripoli. He has served as prime minister twice before, in 2005 and between June 2011 and February 2014. His cabinet is formed on the basis of the same sectarian quota system that has caused so much popular outrage since October 2019, when the demonstrations in the country first broke out.   

Mikati is also one of the richest persons in Lebanon and has been investigated for alleged corruption. His deputy prime minister, Saadeh Al Shami, is an ex-IMF official. Several others in the cabinet are bankers or industrialists.  

The Mikati government’s stated approach is to seek fresh external loans to revive the economy, with the knowledge that it will require further privatization of public assets and ending of the remaining subsidies. While this approach is likely to increase the suffering of the common people, it will likely appease the ruling classes in the country. 

According to the LCP, banks and capital have the largest representation in the new government. In the name of representing the various sects and parties, the government “will charge the Lebanese people in general for the cost of the collapse of the economy and protect the interest of billionaires, bankers and large depositors,” the LCP said.    

Absence of state

Mikati has promised that his priority will be to re-start the negotiations with the International Monetary Fund (IMF), which have been stalled since last year, to obtain a USD 10 billion loan. However, given the IMF’s assessment that the total loss in the economy is around USD 90 billion, almost thrice the country’s GDP, it is not clear how the rest of the money will be arranged. One suggestion, mostly coming from external actors, is to monetize government assets and reduce subsidies. For most Lebanese, this will lead to the complete hegemony of the private sector at a time when most of them are poor and unemployed.    

A majority of Lebanese citizens are already suffering from severe lack of basic public service delivery. According to the United Nations Economic and Social Commission for Western Asia (ESCWA), almost 75% of the population lives in poverty today. The estimated contraction in the Lebanese economy in 2020 was 25%, with unemployment hovering above 40%. 

Power cuts have become so endemic in the country that even parliament sessions have been disrupted by them. In some cases, the cuts last as long as 21 hours a day, leaving the country reliant on generators. 

Lack of adequate imports of food items, fuel, and other essential commodities and the loss of value of the Lebanese currency has led to high inflation. The Lebanese currency has fallen almost 90% since the crisis began in 2019. In July, a report by the Lebanon Crisis Observatory at the American University of Beirut estimated that the cost of the basic food basket of an average family of five in the country is at least five times the minimum wage of 675,000 Lebanese pounds. The minimum wage’s value in dollars has come down from USD 450 a month in 2018 to USD 42 a month today. 

Lebanon’s central bank has frozen dollar bank accounts for small depositors in order to preserve its stocks of foreign exchange, leaving a large number of people without adequate cash.  

Amid the COVID-19 pandemic, hospitals in the country have complained of lack of basic medicines and equipment, such as paracetamol, antibiotics, syringes, and power cuts. In a country where 80% of the health sector is already privatized, common people are finding it increasingly difficult to access basic health care.   

The absence of the state is so acute that many have started calling Lebanon a “failed state”. Economic mismanagement and political turmoil has eroded the state’s legitimacy and created cynicism among the people. The blocking of the investigation in the August 2020 Beirut port blast has further reinforced popular distrust in the ruling establishment. 

Lebanese people have increasingly started relying on private charity and groups like Hezbollah for temporary relief. Hezbollah, apart from running its hospitals and supermarkets, decided to import oil from Iran last month. Despite the US sanctions on Hezbollah, Iran and Syria, Iranian oil landed earlier this month in Syria and was carried to Lebanon in trucks. The organization has managed to secure enough oil to offer a part of it to different institutions, such as the Lebanese Red Cross and public hospitals, for free for a month. It is selling the rest of the oil in the open market at a cheaper rate. 

Meanwhile, instead of finding ways to address the immediate concerns of people, Mikati has blamed Hezbollah for violating Lebanese sovereignty. The US has imposed fresh sanctions on people affiliated to the organization. In the absence of a functioning state, if crucial support systems like Hezbollah are also closed, the ultimate sufferer would be the Lebanese people.

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