At a reception in the lower floors of the Four Seasons hotel in Georgetown, Washington DC, attendees in formal attire armed with cocktails were unwinding to a catchy tune, as they dined on an opulent buffet spread decked with everything from sushi and fresh king-sized prawns, to crab claws.
You'd be forgiven for thinking this was a wedding reception. But it wasn't. This was the Lebanese Bank's Evening Reception (paid for by private funds) and the room was buzzing with bankers, dignitaries and socialites. To be fair, other countries taking part in the annual World Bank IMF annual meetings also had receptions in the hotel. They just didn't seem as decadent given present circumstances.
What made the pomp of Lebanon’s different was that it was taking place against a backdrop of public anger that had simmered back home. Thousands of Lebanese citizens had taken to the streets, frustrated with a stagnating economy which they blame on a broken, dysfunctional system of patronage and corruption that has ruled over the country since the end of a 15-year civil war in 1990.
After years of economic expansion following a monthlong war in 2006 and a political vacuum that left it without a president on two occasions and led to civil strife, growth decelerated to 0.3 per cent last year and is set to fall to 0.2 per cent this year, according to the International Monetary Fund.
Consumer and investor confidence have ebbed, bank deposits which underpin the ability of the government to service its fiscal and current account deficits have declined, while public debt soared to $86 billion, equivalent to 150 per cent of gross domestic product.
In times of crisis, Lebanon’s economic stability has customarily hinged on the wisdom and foresight of its central bank governor Riad Salameh who has been hailed more than once as central banker of the year globally and regionally.
But it seems even he, has limited firepower now to prevent the economy from completely derailing. Lebanese banks who are the largest creditors of the government, are reluctant to finance the state to reduce deficits and the peg of the pound to the US dollar for more than two decades has come under pressure with citizens publicly chastising banks for limiting dollar withdrawals.
“Once you start restricting currency transfers, it’s game over,” a Lebanese banker said when asked if the country had any option before it other than to turn to the IMF.
Lebanon has yet to ask for an aid package or an IMF program, Jihad Azour, the fund's Director of the Middle East and Central Asia Department told The National at the fund's headquarters in Washington on Friday.
The IMF and its programmes are customarily vilified for the austerity measures it recommends. They differ by country but can include introducing or increasing existing taxes, removing subsidies, devaluing or floating a currency and reducing expenditures with the goal of rekindling economic growth and narrowing deficits.
Some of these programmes have worked as is the case with Greece, but it’s not without collateral damage. A general criticism is while such aid and structural adjustment programmes succeed in getting finances in order, they also increase unemployment and poverty.
It’s highly likely any programme that Lebanon may sign up for with the fund will be opposed at home.
“Let’s see, we have 72 hours,” a shrugging prominent chief executive of a large Lebanese bank responded when asked if he was optimistic after Prime Minister Saad Hariri in a televised speech on Friday gave his political adversaries three days to agree on solutions to the impasse.
“Whatever the solution,” Hariri said adding, “we no longer have time.”