How is the Patient, Doctor? Doctor…Oops, Gone to Dubai
The stories from Lebanon are exhausting to hear, but if we, its children and friends from abroad, stop standing with and caring for the Lebanese people who are just barely hanging on, then the political warlord-politicians will have won. This last week was mired in both the ominous and the tragic. Fareed Zakaria, no less a stellar media analyst, hammered the elites in his nightly commentary on CNN that pointed to the traditional political players and Hezbollah as the villains, citing chapter and verse of the tribulations of the Lebanese and the economic ruin caused by the oligarchs.
Add to that the humiliating story of the Foreign Ministry’s recent circular asking Lebanese abroad to pay for the salaries of the local embassy staff as proposed budget cuts would reduce Lebanon’s diplomatic missions worldwide and, in some cases, will result in the closure of its embassies. As Abdallah Bou Habib, Foreign Minister and former Ambassador to the US, reported to Reuters in December, “he had begun implementing a plan to cut spending at embassies, including rent allowances, diplomats’ salaries, and expenses for parties and travel. Savings could amount to $18 million out of a total budget of $95 million.” So in case you thought that consular services were already slowing down, consider the morale of the Lebanese expatriates who handle most of the administrative tasks in many embassies.
Just when Lebanon should be taking initiatives to rebuild its credibility in the eyes of the foreign countries that may be home to potential investors in Lebanon, it instead shoots itself in both feet, becoming hobbled in its capabilities to attract the larger financial support it really needs. Even if the Lebanese staff are paid in local currency such as USD, do the government cutbacks imply that consulate and embassy officers will also have to bear wage cuts that will require further efforts to secure additional sources of income?
Let’s compound the economic abuse with the following two points. According to the Central Administration of Statistics, there was a 2,605% increase in the cost of food and non-alcoholic beverages in Lebanon between the end of 2019 and the end of 2021 (Byblos Bank Department of Economic Research). On top of that, preliminary details of a proposed monetary restructuring under discussion that was seen by Reuters, “projects a 93% devaluation of the Lebanese pound and converts the bulk of hard currency deposits in the banking system to local currency . . . Of $104 billion of hard currency deposits, the plan foresees returning just $25 billion to savers in US dollars, with most of what’s left converted to pounds at several exchange rates, including one that would wipe 75% off some deposits.”
The article attempts to make sense of a 15 year plan to pay back all depositors, based on their level of deposits and stake in the bank. “This time, the losses are divided out as follows: $38 billion by depositors; $13 billion through a reduction in the capital of banks’ shareholders; $10 billion in a government perpetual bond; and $8 billion by the central bank. The plan foresees wiping out 75% of the value of $16 billion in deposits accrued thanks to high-interest rates since 2015, through a conversion to pounds valued at a below-market rate. Ahead of the many restless nights and painful days preceding the approval of such a plan, I encourage you to read the article and to mobilize for fairness and equity.
The widespread suffering of the people was confirmed by Impact Lebanon, the NGO working to develop a database for the social safety net DAEM. After a two months registration period, 582,660 families – or 1,472,523 citizens – registered for help since November 30, 2021. Impact’s report noted that “These numbers are not an accurate indication of the Lebanese population in need of help since many, if not most, in impoverished areas don’t have access to cellphones or the internet to be able to register [editor’s note – the same problem exists with voter registration which is dominated by the traditional parties]. Despite that, the indicated number of registered people needing help in Lebanon is worrying, not to mention the number of unemployed. More than half (58.82%) of all registered individuals stated that they are unemployed.”
The Vatican’s Foreign Minister Archbishop Paul Richard Gallagher is in Lebanon on a mission from Pope Francis. After meeting with President Michel Aoun, he spoke to the press and, “stressed that ‘the Lebanese people must be given the opportunity to be the architects for a better future in their land without undue interference.’” He also revealed that the Vatican is willing to help by hosting a dialogue between the political actors if requested by all involved parties. You can carry that “if” to the bank, which is worth its weight in Lira.
In the meantime, we just have to wait for updates on an interpretation of the bank rescue plan and new monetary policy as well as a realistic assessment of its adoption. If you are looking for some sunshine in this blog, will you take a bit of prayer instead?
Disclaimer: The views and opinions expressed in these articles are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon, a non-profit, nonpartisan leadership organization of Lebanese-Americans. The above image is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.