Lebanon is running out of money — and credibility

Despite the continuing public anger and widespread protests in Lebanon, deputies went to Parliament last week to give the government a confidence vote. Some had to rely on armored vehicles to avoid facing angry protesters. It is obvious that those in power are no longer representative of the people; however, that does not change the fact that they are ruling the country. This government has the lowest confidence rating ever. It was confirmed with 49 percent of the vote. In any case, the new government is only a reincarnation of the previous ones. The same political parties are controlling the same key ministries. The change has been cosmetic by pushing to the front unknown figures who are controlled by the old guards.

The speech of Prime Minister Hassan Diab, with which he gained the confidence of the Parliament, was surreal. He spoke of promises upon promises with no real mechanism or means on how to achieve them. In Jan. 27 parliamentary session, in which the new government ratified the previous budget proposed by the Saad Hariri government, a deputy said: “No money no honey.” The Lebanese political configuration, thriving on corruption, had always found someone to bail them out, but not anymore.

The Lebanese central bank can no longer create money. No one wants to lend to a country that is about to default. Since 2018, the central bank has been spending from reserves that are the economy’s live flesh. A $1.2 billion payment in Eurobonds is due on March 9. The government can choose to pay from its reserves or default. Both cases are catastrophic. The debt is no longer internal. Banks have sold a big chunk of their bonds to foreign investors at a discount to access liquidity. If the government defaults, then debtors can sue the government. If it pays off the debt, it will no longer have reserves to pay for the necessary imports.

Another alarming signal is the measure the central bank has undertaken to escape the liquidity problem. The central bank has started to print money. Printing money is the beginning of the end for any system. Though the central bank says it is doing so to replace old bank notes, observers believe the new notes were used to inject liquidity into the market.

If any help is expected from the international community, there should be transparency as well as serious structural reforms.

Dr. Dania Koleilat Khatib

 

The government has asked for the International Monetary Fund’s technical advice. However, it is a little too late for that. The country’s situation is grim. The government has no national or no international credibility. If any help is expected from the international community, there should be transparency as well as serious structural reforms. However, the current government has no political power and no political will as its patrons are looking for ways to save the day for themselves.

Diab’s long ministerial statement had no substance. It promised the Lebanese people great projects like the metro and a modern military hospital, as well as the eradication of poverty. However, when it came to the obvious economic catastrophe facing the country, the prime minister was elusive. He said that his team is preparing a plan that will be revealed in the coming month — while, logically, the rescue plan should have been the basis on which the newly appointed government was to obtain the confidence of the Parliament.

Lebanon’s political leaders are trying to deflect the situation. The ousted foreign minister Gibran Bassil blamed the situation on refugees, after offering a disclaimer at the beginning of his speech, saying that there is also corruption and faulty policies being implemented. He claimed that refugees have cost the country $43 billion, which is absurd.

Bassil also said that half of the aid to the refugees should go to Lebanon. Those were simply cheap shots to blackmail the international community. This strategy was tried before by the previous government. In 2018, German leader Angela Merkel was indirectly threatened by an inflow of refugees if Europe did not foot Lebanon’s corruption bill. Then, the EU preferred to stabilize a corrupt country rather than see it collapse.

However, the international community will no longer fall into this trap. Where did the billions spent on Lebanon go? Why is it that the country still has no reliable electricity? Where did the $35 billion directed to prop up the electricity sector go?

European parliamentarians are now asking for accountability and demanding recuperation of the embezzled funds that the EU had given for projects in Lebanon. The projects were never realized and the funds found their way into the pockets of politicians.

However, the new prime minister does not see that, as he is guided by wishful thinking: Maybe a miracle will happen and some generous donor will bail the country out. But the international community as well as the Lebanese are not taking this government seriously. They know that this clone government is incapable of any reforms.

• Dr. Dania Koleilat Khatib is a specialist in US-Arab relations with a focus on lobbying. She holds a Ph.D. in politics from the University of Exeter, and is an affiliated scholar with the Issam Fares Institute for Public Policy and International Affairs at the American University of Beirut.