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Lebanon – A Food Desert

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A food desert is commonly defined as a geographic area where residents have few to no convenient options for securing affordable and healthy foods. It is one of several terms I have learned in recent years that applies in part to Lebanon, and implies deliberate actions by one group towards another. Just as Patricia Karam notes in her recent article, “the political establishment was able to counteract all challenges to its stranglehold, entrenching itself by providing opportunities to its economic partners for kleptocratic appropriations.” This directly led to the devaluation of the currency, hyperinflation, and the resulting demise of the middle class and the loss of services and dignity for the poor and marginalized.

Recently, there were two related announcements: one from the Special Representative of the UN Secretary-General on Violence Against Children, Dr. Najat Maalla M’jid, who criticized the lack of progress in the country on protecting the young; and the other from UN World Food Program, which announced an increased allocation of $5.4 billion over the next three years to equally provide food aid to Lebanese and Syrian refugees in Lebanon.

At this point, Lebanon has certainly become a beggar state. Remittances from overseas remain the most important lifeline for many, if they can navigate the opaqueness of the banking system and Central Bank rules. Without an executive government and a parliament unable to elect a new president, the country is languishing. While those with means survive, more than 75% of the population remain in poverty, unable to sustain a quality of life with adequate access to food, education, medicines, and social services. State institutions, the banking sector, and public services are all in disarray. Look no further than the electricity sector which is still unable to provide more than 3-4 hours a day despite the existence of several programs that could double the available electricity.

Facing the reality that a new president must be acceptable to the major political forces and their international supporters, it would seem less and less likely that the systemic corruption can be ameliorated through a house cleaning. And what is left to protect those who are defenseless against the political elites? As the Policy Initiative argues in its latest paper, “The ills of Lebanon’s social protection system are not a result of financial or technical constraints. They are rather political. For decades, ruling elites have consciously eroded the social role of the state to prey on the population’s vulnerabilities as they arise.”

The Initiative’s analysis of the Economic Social Security Net (ESSN) program that is funded by the World Bank illustrates this observation very well. It points out that the politicians delayed the program for almost two years as they tried to re-position the program as a tool for maintaining their constituents’ patronage, circumventing the mechanisms for the transparency and clarity that were basic to the original design of this assistance. In addition, they fought the monitoring component of the program in order to avoid the detection of ineligible participants. While the assistance was finally disbursed earlier this year, a general pattern of political interference can be inferred from this case. It would be a safe assumption, then, to assert that this same kind of interference will be rampant in the ongoing negotiations over the IMF relief package and other foreign assistance programs.

As Lebanon continues its perilous journey into further economic turmoil, carrying a dysfunctional banking sector, driving out its precious human resources, and allowing the reform process to stall with a presidential vacancy, its sovereignty is in danger of being undermined by external forces such as Russia, China, and Syria – as well as the internal forces that directed by Iran. Although Lebanon’s old guard is counting on France and the US to ward off such a possibility, there are no reliable and credible Lebanese partners with whom international supporters can maintain viable and trusting relationships.

Given its political structure, the very nature of assistance to Lebanon gets called into question when well-intentioned initiatives and programs – like the ESSN cash-assistance program that is actionable and immediate – prove susceptible to corruption. When Lebanon’s friends outside the country are seemingly more concerned about Lebanon’s future than its current leadership, a deeper dilemma emerges regarding how much change it will take for Lebanon to become a viable, sovereign, and self-sufficient state. We’re still waiting for that answer.

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.

Imagining A New Lebanon

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Now that the maritime deal is almost done, there seems to be an air of hope – if the three presidents can agree on a deal with Israel, there may be a future for a solid deal with the IMF, too. But if there is to be a “new” Lebanon, will reforms be enough to cultivate Lebanon’s rise from the ashes of the old, or will the seeds of democracy planted by our fore bearers fail to weed out the corruption and mismanagement? Put another way, should we wait until Lebanon self-destructs as a government before there’s a way forward? These are very tough questions, and ones which we struggle with every day at ATFL.

There are so many obstacles to a brighter future for Lebanon. Take the mood of the parliament for example. During the 2022 budget process, the parliament was hardly reform-minded. In a helpful and pointed article from the Policy Initiative titled, “The Rigged Budget,” the authors argue that nothing has changed. In fact, the entire process reflects the chronic inability of political elites to prioritize national issues over sectarian ones and to secure resources for themselves and their affiliated business cronies. They point out, “Ultimately, the budget is not an accounting tool. It is a political document that spells out government priorities and the means to finance them.” Lebanon, as a functioning state, is dying from an ill-conceived banking scheme, lack of productive investments, and humiliating degradation of Lebanon’s currency and hence the life of its people.

There are screams for a national vision that restores social services, puts families first, and prioritizes economic stability and security. The Lebanese Armed Forces (LAF), the most trusted institution in the country, is hobbled by politicians who benefit from illicit smuggling, economic deterioration, and impaired and lacking social services. But still, hopeful people yearn for a renaissance in Lebanon.

Will there be deliverance in Lebanon? Not according to the analysts. As Fadi Nicholas Nassar claims, “Deprivation is the unbearable new normal and it affects every aspect of our lives. One’s income alone does not accurately capture the access to basic rights, like adequate housing, essential utilities, healthcare, or education.”

People speak of Lebanese resilience, but the reality is trending more towards compliance – reflected in conversations about what to do with the refugees, the price of potatoes, the desire to emigrate, and so on. People are finding that humanitarian relief has become a way of life. Similarly, dependence on remittances is part of the new normal since 75% of women are economically inactive and unable to secure the basics for holding their homes together. “Women are increasingly pushed into the informal economy, in a context where violence and abuse are rising and women left structurally unprotected.”

Nassar, argues that, “Households and individuals cannot adjust to fill the state’s responsibilities—the state must prioritize the urgent building-up of essential public service infrastructure to ensure the integrity and access to education, healthcare, utilities, and other rights. A failed state earns its name.”

And yet the beat continues – not that of a parade or the celebratory calling together of people, but more the beat of the dirge that is increasingly heard in the neighborhoods where the poor go hungry, the sick go without medication, and the youth surrender their chances of acquiring life-building skills to the all-consuming entropy of modern-day Lebanon, while parents wonder what good they are if they can’t provide a better life for their children.

Yet, both local and overseas Lebanese are not prepared to fail. Armed with only a small bit of hope, businesses will restart and regenerate employment, banks will restore access to depositors, fully stocked and staffed hospitals and schools will function better than ever, lighting and heating for the upcoming winter will be resolved without over-reliance on generators, and political coalitions will form to sustain hope for the Lebanese people.

Yes, the people know what needs to be done, and it starts with the parliament making the right decisions and focusing on the right priorities – restoring jobs and government services, eliminating hunger, normalizing relations with the IMF. Yes, parliament, you know the way: arrive at a way forward that does not penalize the majority of the people, but instead offers a recipe for reconstruction and revival; elect someone as president who can work across the hole that is Lebanon’s government; and make the vision of a new Lebanon a reality.

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.

A Presidential Role In Saving Lebanon Is Possible

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Let’s be frank. Lebanon needs a winner who can lead. Usually, we talk about capable leaders and managers as two different – but related – skill sets. In the past, this may have been a way to get by. Before, this may have been a more helpful distinction, now Lebanon needs someone who can channel both skill sets, projecting a vision for the country that both unifies and revives the spirit of resolution needed to win and mobilizes citizens for the challenges still to come.

The current situation has two constitutional outcomes: the election of a president within two months or the extended rule of the Council of Ministers who, in presidential absentia, assumes many of the presidential responsibilities. The latter scenario would illustrate the role of managers – a group of professionals who can carry on the day-to-day functions of governing in concert with the Parliament. While not ideal, a train wreck awaits the country if a fully functioning government cannot be assembled by October 31st. Caretaker Prime Minister Mikati is preparing for this team management scenario by pulling together capable ministers who can get Lebanon to move ahead with the IMF deal, reorganize some government functions, keep up sufficient support for the LAF and ISF, and maintain some semblance of a social safety net.

Some prefer the train wreck scenario, which would protect their interests and their capacity to address the needs of their constituents without competition or oversight. Others see calamity in a drawn-out presidential campaign cycle during which a number of coalitions will work to bring about the election of their candidate. The fact is that Lebanon cannot afford a melee as is continuing in nearby Iraq, the other state in the region divided along sectarian lines. Lebanon has neither the energy assets nor the political opposition that could provide options for survival.

So what are the qualities to look for in a presidential candidate and the agenda for the next six months? To be realistic, the president must be someone who can talk with every sectarian leader and understand their minimum and maximum demands. This is also true for communicating with the non-affiliated members of parliament, especially if their votes helped secure the victory.

Other qualities include patience – and a lot of it, a strong sense of anticipating the others’ moves, a clear commitment to policies largely defined at this point by the IMF, receptiveness to the people and the street, and little reluctance to call out the bluffs of those who would undermine Lebanese sovereignly or engage in protracted blame games.

On the platform side, the IMF’s ten conditions, as outlined in the staff level agreement, are clear, including the four pieces of legislation and the other points dealing with restructuring and reviving society. The priorities are also clear: to restore liquidity to the financial system, bring electricity up to 12 hours a day within six months, finalize the maritime agreement in order to have a more stable border with Israel, put sustainable programs in place to care for the people and the marginalized, refuse to engage in regional politics, and constantly communicate transparently with the people and the Parliament. This will begin to instill confidence in the government, especially by appointing capable and accountable personalities to manage the pain of the reforms, the restructuring of the banks, the implementation of capital controls, and the integration of the management of state assets into the recovery process.

Nothing will be achieved without some pain, unfortunately, but the middle and lower classes and the poor can be insulated from the most difficult changes if done transparently and if more of the burden is put on those who have used the system to increase their own prosperity. But the bottom line is, good leadership requires the building trust and recognition of a shared responsibility, thus exposing those who hide behind sectarian veils.

It would be valuable if the presidential candidates call for a consensus national vision to guide the government’s priorities and relationships with the private sector. Rather than impose an outline, a president could call for a series of town hall meetings to promote inclusive dialog and define the nation’s priorities. An associated critical initiative is to meet, discuss, and define a national defense strategy that ensures Lebanon’s prime role in its own security. The recent extension of the UNIFIL mandate for a year gives the new government time to define its priorities and strategy.

None of this is simple except to make wish lists. The candidates should be convinced by now of two realities: that Lebanon is running out of time, and that any reform agenda will be harsh medicine after 30+ years of corruption and mismanagement. Lebanon, however, has the talent at home and overseas to provide the best managers and leaders to SAVE LEBANON.

 

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.

Taking On The Beast – Combatting Corruption In Lebanon

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I used to joke that the Phoenicians, who invented mercantilism in the West, would be amazed that their Lebanese descendants perfected corruption as a business practice and governing tool. Who knew that their descendants would so dramatically enshrine that principle in all aspects of everyday life in Lebanon! Despite the many temporary solutions that have been proposed in the past, today’s abuses clearly transcend a single solution, despite many admirable starting points.

National Budget

Long considered the catch-all for special projects and constituent services, the national budget has two main components for abuse: procurement and contracts as well as hiring and firing. In a recent report, L’Orient Today noted the flaws in the newly passed public procurement law, the key one being oversight of the process. The role of Parliament as the overseer of the public trust is especially questionable. By law, most government bodies, including the Central Bank, should report on a regular basis to the relevant committees in Parliament.

In an annual survey conducted by the Gherbal Initiative, less than 10% of government departments were willing to provide data on how they awarded their contracts. The Central Bank completely refused to even comply with the new law citing transparency as a breach of client confidentiality. Parliament went along with the charade and, as reported, “Among the main highlights, Gherbal Initiative notes that for the fourth consecutive year, ‘the Lebanese Parliament, the primary body responsible for the legislation and implementation of the laws and which itself adopted the law on the right of access to information and other laws concerning the fight against corruption, has not responded to our request’.”

As Mark Daou pointed out in his interview with former Amb. David Hale of the Wilson Center, there is a special committee in Parliament through which all laws get passed and unimplemented laws get sent to their burial – with the same being true of oversight reports. Parliament seldom makes demands, reviews even less frequently, and generally does not interfere in others’ piece of the national pie.

Project Watan, in fact, has made public service and contracting one of its top 8 priorities in fixing Lebanon’s government. The Project has developed public policy recommendations in more than 40 areas with the aim of making the state responsive to the people.

Every World Bank and IMF report for the past three years, some of which going back to the Taif Accord, lament the state of Lebanon’s institutions due to the manipulations of the political class. Governance and accountability are one of the pillars of the Bank’s reform agenda for Lebanon, and although the public procurement law is the only reform that has been passed and is being implemented, it will be more impactful as a case study for how the government avoids rather than implements reforms.

Hiring practices are well-known to furnish “ghost” workers who receive pay, but don’t work or who have been awarded several positions because of their loyalty as a constituent. It is estimated that more than 15,000 public sector employees have been hired under illegal classifications. With the devaluation of their salaries and benefits, these workers have little recourse to finding employment in other sectors of the economy as jobs in general have evaporated.

Rule of Law

While the lack of an independent judiciary and enforcement mechanisms are often cited as the underlying factor in reining in corrupt practices at all levels, it is even more perverse that over time many Lebanese have come to count on corruption as the way to get things done. For example, in a pre-pandemic survey, 65% of ordinary Lebanese believe that people use corruption for various reasons. Most often cited (93%) was to speed up public processes like licensing, property settlements, legal documents, etc. This was followed by securing additional income (92%), avoiding higher payments (92%), receiving proper treatment (91%), receiving preferential treatment (91%), avoiding punishment (86%), and it is the only way to get things done (77%). One can only imagine how these numbers have become worse after the economic implosions, devaluations of the lira, and drying up of health and education services.

Without an accountable and transparent judiciary, free from political pressures, and under the jurisdiction of a single, civil authority, citizens have no recourse to ensure protection for their civil and human rights. In tandem with this are police and magistrates who protect these rights as a core duty. Just as important are prison systems and public defenders who have clearly defined roles and guidelines that enhance, not undermine, justice.

The Agenda Ahead

The new parliament and the incoming government have many challenges in forming a government to respond to the IMF reform package, electing a president, carrying out municipal elections, and setting priorities and investments that respond to the needs of the people. From electricity to salaries for teachers and health workers, to transportation, garbage, and sanitary water services, the list continues. After more than 30 years of neglect and mismanagement, the future requires a whole-of-government response. The energy and inventiveness of the Lebanese people in response to the initial Beirut Port explosions show that the creativity and energy are there. It is time to invest in the people.

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.

Mourning in Lebanon

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These past two weeks succinctly reflect the nature of Lebanon’s demise – a six-week old public sector strike, desperately needed grain being refused by the buyer after a five month delay, another threatening speech by Hassan Nasrallah. Another day spawns another disaster in Lebanon, or another threat of hostilities and civil disorder, or another rise in the cost of essential goods and services – if they are even available. It’s a never-ending marathon of man-made tribulations, mostly made in the case of Lebanon. On the government side, continued parliamentary impasses, an uncertain move towards a government formation, and the upcoming presidential elections all coincide with new members of parliament learning what it is like to govern in a vacuum of collaboration.

The reality in Lebanon is that the state is in desperate need of triage, starting with the government owning up to its responsibilities to reform and recover. It has so far not come to terms with its own history over the last thirty years, out which this debilitating economic crisis has emerged, even if the outcome of the recent elections has offered hope to various opposition figures, emboldening them to make sure that presidential elections occur on time, the reform process goes ahead, and Lebanon’s road to survival becomes more than a fleeting hope.

As an article in GulfNews.com mentions, “Heaven knows, Lebanon had weathered loss in its 79-year history as an independent state, but the port explosion was of a different order, for it morphed into a collective trauma that so completely overwhelmed people’s ability to grasp, let alone cope with what had happened, and so shattered the basic fabric of society as to leave people numb. It was literally an earthshaking happening that led to a marathon of mourning.” And the trauma continues.

“What the Lebanese people are experiencing today — have, in fact, been experiencing for decades, as their polity sunk deeper and deeper into pandemonium — is no less than an emptying out at the core of their national soul, a negation of that fusion of form and content, means and meaning that a people strive for and a nation provides.”

The concept of a nation, let alone a state, seems to be lost on some leaders. While the speaker of parliament urged the holding of presidential elections, formation of a new government, and conclusion of the maritime boundary negotiations with Israel, his ally, Sayid Hassan Nasrallah, took aim in his Ashoura rally at those same boundary negotiations. Hezbollah’s Secretary General also took aim at Israeli attacks on Palestinians in Lebanon’s refugee camps as well as the ‘alternative’ to any upcoming presidential elections, calling into question any way but his way to a future for Lebanon.

Meanwhile, the public sector strike reached its sixth week as employees seek some dignity amid the plummeting of their salaries from $1300 USD a month to just under $70 USD. The middle class is not just hollowed out, it has disappeared. There is a dilemma in the resolution of this issue, however, in that the 350,000 workers who make up the public sector will face shake ups in employment if reforms to the national budget are implemented, eliminating ‘ghost’ employees and redundant labor.

While the search for a consensus presidential candidate continues among Lebanon’s political chiefs, prospects grow dim as all sides aim to get past the 3/4‘s requirement to win on the first ballot in parliament – after which only a majority is required on successive ballots. There is much scrambling going on, which is delaying the formation of a new government that can proceed without a new president. Instructively, Caretaker Prime Minister “Mikati’s lineup did not satisfy [current president] Aoun, who said the prime minister’s choices undermined him. Communication between the two has been fraught since then, and all attempts to revive forming a government have stalled.”

Speaking of sermons, let’s not overlook Maronite Patriarch Beshara Boutros al-Rai’s latest attempt to shake the status quo. In his weekly sermon, he wondered aloud why it’s easier to negotiate with Israel over a maritime boundary than come to an agreement on a government. Without criticizing the maritime boundary negotiations, he points to the continued divisions among the country’s leadership. “Isn’t it shameful that authorities make efforts to reach an agreement with Israel on maritime borders but refrain from forming a government? Has it become easier for them to agree with Israel than to agree on a government among the Lebanese? Isn’t the split in political power in Lebanon, and of the parties… the basis of the (country’s) political, economy, financial and social decay?” he added.

And so Lebanon continues to hobble along, temporarily supported by the economic boost of this year’s tourist season, comprised of mostly expatriate Lebanese visiting families and perhaps seeing their homeland one last time before it disintegrates. There is always hope that some intervention may yet enable Lebanon to move on, but help from external forces has never been a long-term solution, only the Lebanese can do that. Thawra revisited? May be time for a new revolution?

 

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.

Solutions In Sight? Checking Lebanon’s Pulse

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As quoted in the recent edition (Issue 734) of Lebanon This Week, published by the Economic Research and Analysis Department of Byblos Bank, “Given the intensity of the compounding crises in Lebanon, it is the responsibility and duty of all political actors to work together to prioritize the national interest and to rise to the challenges facing the Lebanese people.”

This assessment in the UN Security Council report succinctly summarizes Lebanon today, torn between a continuing decline and a struggling political system fighting itself while trying to re-orient its priorities. Having mostly survived the parliamentary elections, the traditional leaders insist on a slow-go strategy when it comes to reforms. There are some breaks in the gridlock: passing reforms to the Banking Secrecy Law, adopting the World Bank loan of $150 million to support wheat purchasing and distribution, raising some public sector salaries, and the promise of a national budget are all steps in the right direction.

There is legitimate concern over whether the various amendments to the Banking Secrecy Law will be passed or not and in what form; if the conditions of the World Bank loan will be met; and if the government can find some way to raise salaries without increasing the national debt.

The global crowd-sourced database, Numbeo, ranks the cost of living in Beirut as the 12th highest in the world and the highest in the Arab world, outranking Dubai (12 vs 208 globally). This means that the costs of living in Beirut are 98% higher for its residents than most of the 510 other places in the world that were tallied. Globally, groceries in Beirut are more expensive than those even in southern California, Geneva, and New York City, but cheaper than those in Zurich, Bern, and Honolulu. Similar comparisons were made regarding rent, restaurants, and consumer goods.

Given the deficiencies in the fiscal health of the country, the untouchable gold reserves, and the soon-to-decline bump in revenues once the tourism season is over, the government only has a few options. The country may dissipate into a fragile state that can neither pay its bills nor support is people, making its state of affairs easy prey for regional actors with malign intentions. It can adopt the necessary reforms to initiate the International Monetary Fund (IMF) recovery regime. As some have advanced already, the Lebanese government can ask for UN receivership to take over the country and manage its affairs.  While the last option has some support, given the political realities, leaving Lebanon to the hands of UN administrators is a fantasy for those who either don’t believe in the capacity of the system for recovery and renewal or have their own agendas.

The United Nations and the international community are ready to assist through multiple avenues once reforms are instituted. In the UN Sustainable Development Comprehensive Framework (UNSDCF) with Lebanon, the UN has made clear that adopting reforms is key to achieving the Framework and restoring investor confidence in the country. The UN’s assistance in promoting a development-based approach to recovery is based on the assumption that key structural reforms will be implemented. The UN has also said that it would develop a joint financing strategy to implement the UNSDCF and to ensure multiyear financing for key emergency development priorities.

What’s critical in this proposal and others from international donors is the emphasis on the implementation of a multisector approach that includes reforms to the government and the fiscal system, with an emphasis on reinvigorating the private sector and restoring economic activity in order for people to regain their livelihoods, strengthening and broadening the social safety net, and restructuring public services to sustain a broader base of community services, among others.

There are many papers indicating what must be done; how and by whom are the needed ingredients. In any scenario, there will be painful adjustments, and both the Parliamentary and government leadership must step up and respond to the public’s desperation before it turns into rage as in Sri Lanka. It is obvious to the political chiefs that the painful implementation of restructuring will reduce their hegemony and capacity to continue their control over state business.

Lebanon needs to take stock of what it must do to regain its sense of purpose and direction to once again become a land of opportunity and promise. This will require adjustments and shocks to the system to end the current status of prosperity for the few and remnants of a quality of life for the rest.

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.

Will Lebanon Survive the Winter?

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Even with the possibility of the stabilization of energy prices, the value of the lira, and sources of fuel for heating and transportation, there will definitely be a surge in demand as the weather turns cooler, making heat and travel even more expensive for the already desperate Lebanese. The economy is currently buoyed by tourism dollars and remittances from Lebanese visiting families and friends. This will come to an end during the fall.

Out of all the scenarios facing the country, total collapse to a beggar state is one that is increasingly likely given the government’s inability to pass legislation needed to advance the reforms called for by the IMF staff-level agreement.

According to a reliable source close to the Mikati government, three pieces of legislation that are already passed but not implemented – namely, the 2022 National Budget, a Capital Controls Law, and Banking Reform – are awaiting signatures and steps needed to secure their enactment. Still on the table is a Banking Restructuring Law that is being held up by objections from the Central Bank. Given that its Governor is opposed to the IMF package altogether, and that his reappointment in 2023 is bound to be hotly contested among the elites, any progressive legislation is due to generate heated debate. The recent referral of amendments to the Banking Secrecy Law to a subcommittee seems to show that certain quarters fear the reforms would expose some of the system’s corruption as well as its beneficiaries. But the referral itself is a long-standing parliamentary practice to fast-track the amendments.

Spending foreign reserves at a rate of $25 million a day, it won’t be long before Lebanon is officially bankrupt with few optionsleft, if any. Since these monies are drawn from the depositors’ accounts, there is further debate about how to best prepare for the eventual demise of the lira if no remedial action is taken to stabilize the currency.

Some alternatives already being implemented across Lebanon are sustainable grassroots development projects, mostly in revitalizing agriculture, producing energy from renewable resources, reviving small businesses, and promoting recycling. While these are small steps, and quite decentralized at this time, they could lead to a more effective, decentralization strategy that the new Parliament could embrace, making it more cumbersome for Lebanon’s political fiefdoms to pursue their objectives and maintain control. This makes next April’s municipal elections are even more noteworthy, as there is no guarantee that a “deal” for naming the new President will be emerge by the deadline in October. In that case, the Council of Ministers incorporates the Executive functions to a degree and works with Parliament to pass needed legislation in certain categories.

Although stories have been written about the move toward a more decentralized country, commentators note that the biggest obstacle to this alternative structure, other than the usual political machinations of the elites, is lack of needed legislation to create programs that enable small businesses to acquire the resources needed to access energy, financing, and equipment. A key metric is the coordination and cooperation among the central government and the municipalities to, “find local solutions to best support small businesses that can play a role in entrepreneurial survival and recovery,” according to a recent paper from the Lebanese Center for Policy Studies.

Another factor affecting the likely success or failure of local efforts mentioned in a Frederick Naumann Foundation paper is that, “weak local financial institutions jeopardize the accessibility of the rural community to financial resources, in addition to creating wealth inequality. These factors can create an adverse entrepreneurial culture, the constraint that rural areas in Lebanon are confronting, and there is a need today to shift to non-conventional financing models.’

While I will continue to write about decentralization in a future blog, it is critical to understand how rural and small communities can be supported as they work to achieve self-sufficiency, create income producing projects, and achieve results that can be replicated in other communities. One such project I visited is Alzourou3, which is an agricultural whole-of-community approach pioneered by Jessica Hokayem. She has created items refashioned from recycled materials, food items, and other homemade products for sale that illustrate what small communities can do to sustain themselves.

Most importantly, as a young university graduate, she has mastered the use of social media to promote her efforts and products. Imagine linking dozens of communities where similar projects are based and benefiting from access to overseas markets made possible by Fair Trade Lebanon and other NGOs that help promote local products in overseas markets for fresh dollars.

Giving hope and means to villages and small communities in Lebanon is not a heavy lift for Parliament. For example, the production of electricity through renewable energy, such as solar panels, is being pioneered by Rotary International. Several other community and agriculturally-focused projects supported by USAID in addition to itsINAL solar power initiative. Maybe it’s time for Parliament to consider depoliticizing local development so that adequate sums can be allocated to support sustainable projects while Parliamentarians debate over Lebanon’s future. Free the people to help themselves through sustainable projects!

 

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.

Setting The Agenda: What’s Next In Lebanon?

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Now that the elections are over, it is only natural to ask about emerging coalitions; the results are in, claims and conspiracies are being made, and Lebanon has yet to surmount this deteriorating economic crisis. Although there is little reliable demographic information available as to the gender, age, and geographic breakdowns of this year’s voter turnout, there is also very little disagreement over the fact that the hard work towards recovery must begin now. Voters seemed to have made that message clear given the results.

The only realistic claim regarding the speculation of emerging coalitions is that there will likely be shifting alliances based on issues, rather than solidified camps. So far, independents and the opposition from civil society have formed a bloc of fourteen, but where are the others? The truth is that it is still too early to tell.

For example, what will be the fate of the Lebanese Forces in the new Parliament? It seems self-evident that the Lebanese Forces should build a bloc on more than an ‘anti-Hezbollah militia’ platform. An ‘Anti-Hezbollah’s arms’ posture is too narrow a plank to sustain the myriad of pressing issues the country faces. Even within its own ranks, how will the interests of members returning from the previous government situate themselves in this new Parliament if those interests are addressed or not? Will the party use this time seeking payback or will more maneuvering be required of them to secure additional services for their constituents? There are still 60+ seats out there that represent constituencies whose major issues are hunger and corruption as well as the lack of access to bank accounts, health and social services. That’s why I believe that the “anti-” messaging will have to find room for additional positions on which to ground their platforms or Lebanon will be in gridlock.

It is far more logical to address the questions faced by the past unsuccessful governments and assess how new coalitions will orient themselves around the following issues: improvement of the electricity sector, banking reform, independence of the judiciary, anti-corruption measures, and the many other policies that must be seriously implemented and prevail in the country. Can the various opposition and independent groups generate a common platform that will draw the necessary votes for success? One would think that this should be a no-brainer, but then again, this is the Lebanese government  that we’re talking about.

For example, most politicians agree that electricity reform and restructuring is needed but fault lines emerge over contracting, oversight, reporting, rate-setting, and other trivial points of contention that would be easier to solve if the new parliament and government just follow the steps that were outlined in legislation passed in March: independent monitors, a non-confessional electricity board, an independent body for setting rates and production issues, etc. The political will to act on these issues should now be less difficult to muster.

Another immediate agenda item is the monetary and fiscal reforms required to stop the hemorrhaging of the currency, provide access to depositors’ accounts, begin banking sector restructuring, and bring stability and discipline to public spending and the foreign exchange rate. These reforms are also tied into measures that fit under the “anti-corruption” designation, which include public contracting, rules concerning privatization, recapturing illegally assigned public lands, and tracking abuses of capital controls.

You get the point – the national agenda is exceedingly long and there is no unanimity regarding priorities. I  therefore suggest select issues that coalitions can prioritize as they aggregate to elect the next speaker of the parliament. There is popular concern surrounding the electricity sector, capital controls, the protection of small depositors and access to their funds, and the commitment to a robust social safety net. These are all issues that will rally the public and can demonstrate to the people that the new Members of Parliament are concerned with getting Lebanon on the track to recovery and renewal.

After over thirty years of mismanagement, however, these steps will only just begin to make a difference. The key is building a government with the confidence and courage to enact reform and restore the public trust. So after the speaker is elected, what follows is the new government – selecting the prime minister and approving the council of ministers and their mission statement. This is all a prelude to the presidential election that will pose a dilemma if the choices of speaker and prime minister have been contentious. Lebanon is in a dilemma for the newly-elected parliament – how should it proceed in choosing the Speaker? Who will have the power to channel the process of nominating the Prime Minister, the cabinet, and eventually the President?

So Lebanon watchers should focus now on encouraging the parliament to build a reform agenda, electing a speaker committed to that platform, and advocating for similar commitments in the exercises to complement the government’s formation. Lebanon has the expertise and the will of the people on the side of reform, now is the time for the government to do what it has been elected to do: save Lebanon and serve its people well.

 

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.

What’s In It For Lebanon – The IMF Staff Level Agreement

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For many in Lebanon, the announcement of the staff-level agreement with the IMF on April 7, prompted rather short-lived sighs of relief. That may be because certain actions are still required before any money flows at this level of agreement, and because the many challenges to its implementation have become clearer only days after the announcement on April 7. Sisyphus had it easy, one could say, in comparison to the anticipated obstructions that the agreement faces including the May 15th elections, as there are limits to what can get accomplished in the few weeks and three holidays between now and the opening of the polls. In particular, the formation of a new Council of Ministers within five months, the election of a president by the new government, and an agreement on a parliamentary agenda must all take place before any reforms can seriously happen.

As one recent US visitor to Lebanon remarked, “The easy part is over…the number of unknowns and lobbying against the agreement have only started.” Despite assurances from Lebanon’s three presidents, top political leaders, the Bankers Association, and other prominent figures and organizations, much must be done to answer the difficult questions ahead. First on the docket is the need for the government to cobble together a banking restructuring plan which clarifies the costs of debt restructuring to current bank depositors, shareholders, and owners. Concurrently, a lame-duck parliament should begin restructuring the electricity sector– a positive first step being the approval of two power plants and the agreements with Jordan and Egypt for electricity and gas supplies –  as well as implementing a mechanism for allowing the exchange rate to stabilize so that people have some notion of what their money is actually worth.

The staff-level agreement has yet to be submitted to the Managing Director and Executive Board of the IMF, and their approval depends on the commitments of Lebanese leaders to actions before and after the new government becomes functional. What is at stake is a “46-month Extended Fund Arrangement (EFF) with requested access of SDR 2,173.9 million (equivalent to about US$3 billion). This agreement is subject to approval by IMF management and the Executive Board, after the timely implementation of all prior actions and confirmation of international partners’ financial support.”

There is no guarantee that the international partners are still willing to hand over the more than $18 billion in concessional loans pledged at the CEDRE Conference. Yet their financing is essential to a successful revival strategy. As the IMF statement noted, “Financing support on highly concessional terms from Lebanon’s international partners will be essential to support the authorities’ efforts and ensure that the program is adequately financed and can meet its objectives.”

The recovery agenda tasks both Lebanese parties and the international community with multiplier roles to assume. For example, the Central Bank of Lebanon and the Association of Lebanese Banks must come to an agreement about restructuring the sector including cuts to depositors at various levels to reduce the banking sector’s liabilities. So will depositors be spared from a cut to their accounts above $100K, $150K, $200K? Where and in what time frame will they be able to have access to their money?  This will then impact negotiations with the international bond holders who will want to recover as much of their investments as possible. And all of this will affect the restructuring of the banking sector, which will see winners and losers as some banks are able to be recapitalized and others will fall by the wayside. With an agreed national debt of $69 billion, some severe measures will need to be taken, not the least of which is reducing the burden of the public sector (government employees and operations) starting with the electricity sector, eliminating subsidies, and no new taxation.

Many are skeptical that Lebanon can fulfill its side of the agreement based on past behavior. This is the conundrum faced by Prime Minister Najib Mikati’s government. It entered into good faith negotiations with the IMF after two years of failed attempts, and was able to secure an agreement approved by Lebanon’s political elites, but there are no assurances of successful implementation. The961 reported that “Amal Movement’s MP, Yassin Jaber, said earlier that the parliament may approve a capital control law and budget law before the elections, which are part of the IMF’s conditions. However, as the report mentioned, the current government did not work on the rest of the reforms.”

With the elections in full swing, it is doubtful that more than the most basic conditions of the agreement will be met. In fact, Nicolas Nahas, an advisor to Mikati, stated that the reforms will not happen before the elections, since MPs are now busy with their electoral campaigns. He noted that “The agreement is a kind of benchmark of what should come after elections. So, after elections, parliament will start studying quickly these actions and then we shall see how we go forward.”

Hope is in short supply. With more than 80% of the Lebanese people and refugee populations now near or below the poverty leve,l the economy is now maintained in large part from remittances and family support from abroad. Lebanon has the IMF deal in place, but only if it meets its end of the agreement. There may be an awakening and revival of hope by year’s end, if the supply of electricity becomes more regular and less of a burden on the people. The end of the year may seem like a long time away, but much must be done to put the staff level agreement on a solid track to success.

 

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.

Lebanon, the IMF, and the Parliamentary Elections – What’s the Story?

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A war of words is being waged against the prospects and need for an IMF rescue package as some sources claim it will force drastic measures in the name of reforms that would undermine the long-term stability of the economy. This is not a new claim, especially coming from those who have the most to lose in any alteration of the status quo and restructuring of the banking sector, transparency in public procurement, and stabilization of the currency. The lower and middle classes have already suffered the most from the devalued currency, hyperinflation, and inability to procure essential health products or pay for basic services such as education and power. The arrow of paying the price is gradually turning towards those who use Lebanon as a base and have suffered little dislocation from the economic withering of the State.

The reaction of the Association of Lebanese Banks to the proposed financial plan is just one indicator out of several revealing how those with deeply vested interests envision the pain should be spread. Of course, the plan has many flaws, especially because of its uneven distribution of losses and its reliance on a timeline that does not deliver relief to the majority of bank depositors. Where are the alternative scenarios, though, that are able to meet the three objectives of stabilizing the currency, restraining national spending, and increasing state revenues? Yes, the devil is in the details but without these steps, Lebanon remains a pariah in the investment community.

According to the Economic Research Unit of the Byblos Bank, the IMF said, after its last two weeks of consultations in Lebanon, that, “the unprecedented and complex nature of the Lebanese crisis requires a comprehensive economic and financial reform program to stabilize the economy, to address deep-seated challenges, and to lay the ground work for sustainable and strong growth.” While the negotiating teams were in agreement on the areas in which to target reform, additional meetings are needed to produce a detailed program. In other words, the government needs to do its homework, pass a national budget, and build a national consensus to support a multi-year austerity program.

The IMF identified five main areas of achievable, short-and medium-term measures that would provide a framework for future reforms. According to Byblos Bank, this includes “reforming state-owned enterprises starting with the energy sector and improve delivery services without additional public financing [subsidies]; enhancing transparency and accountability by strengthening the governance, anti-corruption, and the anti-money laundering, and combating financing of terrorism frameworks; reforming public finances to ensure debt sustainability and to provide space for social spending and reconstruction; restructure the financial sector to restore confidence and support the recovery; as well as establishing a credible monetary and exchange rate system.”

The IMF had other recommendations regarding the sequence of reforms suggesting that the government move immediately on energy sector and public procurement laws and take steps to build credibility with the Lebanese people as well as international donors. The approval of a proactive 2022 national budget will send a strong signal that the government intends to move in the right direction as the bottom line remains the same: it’s up to the Lebanese Parliament and political leadership to take the necessary first steps on the pathway of reform.

 

Election Fever

There is no lack of candidates counting on support from the Sunni community, despite the urgings of former Prime Minister and Future Movement leader Saad Al Hariri to boycott the polls. Former prime ministers aside, a number of voices are already presenting themselves as the ideal fillers of this emerging political vacuum. Bahaa Al Hariri, Saad’s brother, has indicated that his party, Sawa Li Lubnan will field around 30 candidates in May without confirming if he will run himself.

There is no certainty that the coalition of the Free Patriotic Movement, Amal, Hezbollah, and Marada will maintain their Parliamentary majority as fissures are beginning to appear. In fact, opponents only need to win a minimum of 15 seats to deny the coalition the seats needed to capture the Parliamentary votes to name the President or to make changes to the constitution. That is one of the reasons observers fear a resurgence of intercommunal violence in which people would turn to their traditional sect leaders for protection rather than take the risk of voting for the opposition.

Despite the fact that the 2018 elections cost the Lebanese government some $54 million, Prime Minister Najib Mikati announced that $18m has been allocated for the 2022 elections. Embassies have been instructed to find local funding to support overseas voting for the Lebanese registered to vote in local centers. This measure is in addition to the solicitation of funds from various countries as well as the UN to support the facilitation of elections in Lebanon which includes everything from ballot processing to funding ISF-run security at polling stations, and travel allowances for election officials. It was with some surprise that Prime Minister Mikati acceded to President Aoun’s request that the Minister of the Interior prepare an analysis of the possibility of mega-centers to be incorporated the upcoming elections.

The drama of reform and the elections continues to build, as do the indicators of the postponement of either process. Lebanon continues to inch along on the backs of remittances and family transfers. Foreign officials come and go, giving the government the same message, but hope has to emerge locally, as the vacuum is continues to be deafening.

 

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 4.0 International license.