Lebanon’s Human Tragedy Is a Leadership Travesty

Tuesday, December 8, 2020
Opinion By Jean AbiNader

There is little comfort in the announcement that PM Designate Saad Hariri presented his ministerial slate to President Michel Aoun on December 7th. So much damage has been done to the spirit of the Lebanese people, so many of its skilled people are emigrating, and so much damage remains as a grim reminder of the government’s inability to address basic health and social needs, that it is hard to believe that anything will change without massive external pressure on the political elites.

As a Reuters story reported, UNICEF Representative Yukie Mokuo and ILO Regional Director Ruba Jaradat wrote in an op-ed that, “The impact of removing price subsidies on the country’s most vulnerable households will be tremendous and yet there is almost nothing in place to help soften the fall. It is critical to realize that for Lebanon to fly off another cliff now, without first putting in place an inclusive system of social guarantees, would be to inflict a social catastrophe on the country’s most vulnerable people, sacrificing their wellbeing, and that of the country as a whole, for many years to come.” They further pointed out that “A rough analysis shows up to 80% of the subsidies may actually be benefiting the wealthiest 50% with only 20% going to the poorer half.”

Given the precipitous decline in the country’s stability, politics as usual will not produce the reforms needed to enable Lebanon to access international funding to support its recovery. The situation has become so dire that international donors meeting last week pledged an additional $121 million of EU funding to previous allocations for humanitarian aid. Even starker are details in the recently published World Bank report on Lebanon titled, “The Deliberate Depression.” (For more detailed statistics and graphs on the metrics of the economic and financial decline of Lebanon, download the report.)

At this point, it’s hard to imagine how Lebanon can dig itself out of its overlapping catastrophes without forceful intervention. Revenues have declined as major sources such as tourism, construction, financial services, international investment flows, and remittances have evaporated. Although there has been a small decline in government expenditures, most of this was brought about by the Central Bank moratorium on repayments to Lebanese banks of interest on local bonds.

The drop in foreign reserves resulting from the drying up of remittances, international investors, exports, and other revenue sources such as customs, and the absence of any corrective measures by the government has caused such deep economic erosion that the World Bank report states that “Therefore, and as things stand, Lebanon’s economic crisis is likely to be both deeper and longer than most economic crises.”

The analysis of the contributing factors to the fiscal and economic deterioration, and consideration of remedies make up the first part of the report, and present important corrective information on proposals made by various parties that would either favor the wealthy at the expense of the rest of the population, or are poorly conceived in terms of ease of implementation.

The last portion of the Report proposes a reform agenda “to help set the stage for a more equitable, more efficient, and more resilient economy. It puts governance reforms at the fore, alongside macroeconomic stabilization. [It] is meant to feed into an open discussion among the citizens of Lebanon and between them and their government.” The theme of the central role of a national discussion recurs throughout the report as the authors expect the “adjustment process to be more painful and to take longer, even with optimal policy measures in place. As it currently stands, however, the absence of a comprehensive and consistent adjustment strategy can only make this more difficult.”

Without a strategy that reflects priorities and needs of the people, any enduring solutions that avoid repeating conditions of inequality and sectarian power-sharing, the recovery will be impossible to achieve. For example, if you ask people of all classes what is their most troubling challenge, the need to access dollars or a stable lira to purchase basic goods and services is the top concern. The current informal capital controls enable the banking system to avoid accountability for their non-compliance of full disclosure of assets and liabilities. At the same time, this leaves large discretionary opportunities for banks to make whatever arrangements suit their shareholders and largest depositors. This has led to the demands from the Street to hold to account those who have exported their funds which protects the banks’ assets rather than its smaller depositors including small businesses.

Credibility and trust are also addressed in the report. “Before any financing for an economic recovery can take place, Lebanon must restore the trust between government and citizens, between government and investors, and between government and donors. Under a no-reform scenario, Lebanon’s economy is forecast to contract for the next two years; to mitigate this, decisive action must be taken to save Lebanese citizens and refugees from an economic and humanitarian catastrophe.”

The Report insists that “Without reforms, there can be no sustainable recovery and reconstruction, and the social and economic situation will continue to worsen.” The story beyond the numbers, charts, and table illustrates the deficiencies of Lebanon’s fiscal and economic sectors and the associated human costs. It is an indictment of leadership that has isolated itself from the people and is determined to preserve its prerogatives at almost any cost.

As the Report concludes, “The reform agenda presented is meant to feed into an open discussion among the citizens of Lebanon and between them and their government. Its aim is to contribute to the debate that needs to take place on the path out of the ongoing crisis, the sequencing of reforms, and the long-term development vision.” This means an honest, transparent, and accountable exchange among Lebanon’s stakeholders, fueled by international pressure and incentives. Otherwise, Lebanon, as an inclusive, open society providing opportunities, rewarding achievement, and serving the needs of all, will pass into the annals of history as a brief glimpse of what might have been had the leadership cared to serve the people, all the people.

The views and opinions expressed here are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon.