Is Lebanon’s Government Formation Actually Coming Together; Will Lebanon Realize the CEDRE Commitmen

Wednesday, October 24, 2018
Opinion by Jean AbiNader

As Lebanon winds its way towards the formation of a government, there are many questions concerning the expected contentious discussions around the ministerial statement that sets out the priorities of the new government. There have already been reports coming out of the prime minister’s office delineating the more obvious issues: adopting reforms called for in the international donors conference, ensuring that the national budget is adhered to and public funds are used effectively, the policy of dissociation is restated and emphasized as the way forward for Lebanon’s regional foreign policy, the status of the Syrian refugees and repatriation are urgently addressed, opposing efforts to make Lebanon responsible for generations of Palestinian refugees, affirming the strength and independence of the banking sector, and relations with Russia among other key players in the region.

In addition, there are concerns that the statement may be as opaque as labne, a very thick version of laban, Lebanon’s yogurt, and avoid the hot issues of the environment, health care, waste management, the role of the Lebanese Armed Forces and Internal Security Services, regionalization, deteriorating infrastructure, overbuilding in urban areas, and how to build an inclusive and sustainable economic opportunities for youth and women.

There will be many observers looking for key terms that affect their relations with Lebanon, for example, what will be said about Hezbollah, Iran, and the continued presence of Hezbollah forces in Syria; future ties with a resurgent Syria; how Lebanon will respond to US redlines related to the role of Hezbollah within the new government and continuing as a regional proxy for Iran; will Lebanon restate its commitment to its independent existence as a multireligious, multi-sectarian entity; will economic issues related to the opening of the Nassib border crossing be specifically mentioned; what will be said about the demarcation talks needed to push ahead with energy exploration; will there be a reference to Israel’s violations of the southern border and Palestinian rights in the West Bank and Gaza; and what will be said to calm potential investors and promote economic growth and stability.

As noted in a recent article in Executive Magazine, Lebanon received pledges of support amounting to $11 billion: $10.2 billion in soft loans and around $800 million in grants. The bulk of the commitments came from The World Bank in a package of soft and concessionary loans totaling $4 billion.

Recounting Lebanon’s not so successful history with international donors conferences, the article poses a number of questions including, “Do the CEDRE proposals have any chance to succeed, given the regional dynamics and the conflicting interests of the different stakeholders? Can Lebanon’s economy go on despite the worrying economic indicators?” And if economic growth declines even further, will Lebanese join their Syrian counterparts in seeking livelihoods elsewhere?

Lebanon’s offer at CEDRE is based on four assumptions: increasing public and private investment; ensuring economic and financial stability by bringing order to the national budget and fiscal policies, implementing key sectoral and cross-sectoral reforms including fighting corruption and modernizing public sector financial administration and management; and building a long-term strategy for economic diversification and growing exports.

Regardless of what Lebanon agreed to in Paris, “Lebanese and international economists are increasingly warning that the country is experiencing a financial crisis that, despite reassurances by politicians and central bankers, could threaten the national exchange rate and the banking sector if appropriate and specific actions are not implemented. “

While the major political players have committed themselves to the CEDRE agreement, the article concludes that “In the end, reforms needed to unlock CEDRE financing and put Lebanon back on the path toward renewed economic growth and monetary stability will require compromises from political and economic Lebanese stakeholders, and a willingness to break from past behavior.” Looking backwards, the way forward doesn’t look straightforward.

While there are no clear indicators as to the disposition of the political leadership regarding the ministerial statement, there are signs that the major players are tiring of the stalemate pitting Christians against Christians and Druze against Druze, thus giving other players the opportunity to angle for concessions that favor them and their constituencies. While this is especially bad news for Prime Minister designate Hariri and his Future Party, it continues to demonstrate that Lebanon’s political leadership counts on dysfunctional and zero-sum strategies to keep themselves in power.