Stalling financial reform is endangering Lebanon's recovery prospects, says Najib Mikati

Caretaker Prime Minister says political deadlock is preventing legislation being passed to tackle economic crises

Caretaker Prime Minister Najib Mikati said Lebanon's economic woes 'need solutions immediately'. EPA
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Lebanon's caretaker Prime Minister Najib Mikati has said that Parliament's inability to pass financial laws necessary for the country's recovery is jeopardising prospects.

This came after a session in Lebanon's Parliament to discuss capital controls was postponed because a quorum could not be achieved.

Deadlock between political parties over the election of a president has helped paralyse the political process.

“It has been four years since the crisis started, and no financial reform project has been approved so far”, Mr Mikati said on Thursday.

New legislation on capital controls – which limit the flow of foreign capital in and out of the country – is a prerequisite of an International Monetary Fund deal to unlock billions of dollars in loans.

This money is required to help pull the country out of its economic meltdown, which began in 2019.

The crisis has led to a currency devaluation of over 98 per cent with losses in the financial sector of over $70 billion, leaving the banking system paralysed and depositors unable to access their savings.

An estimated 80 per cent of Lebanese now live in poverty, with 36 per cent below the extreme poverty line, the EU said in March.

Other required reforms include a restructuring the banking sector, which could revitalise struggling banks while eliminating insolvent ones, part of an effort to restore confidence in the sector.

The reforms are also part of the road map outlined by the new acting Banque du Liban governor Wassim Mansouri, as a condition for the central bank to lend to the state.

Despite the urgency of the situation, the Lebanese ruling class has been unable to implement required reforms.

“All these need solutions immediately – if they are not resolved and Parliament does not convene and make it all some kind of one package to be decided on, there won't be economic stability in the country”, Mr Mikati said.

He said that a dedicated parliamentary session should be convened, where a package of long-awaited laws to overhaul the financial sector and restructure banks should be passed.

However, some political parties, which include the two main Christian parties, are against holding any parliamentary sessions for voting on these laws until the country has a president in place.

They argue that, according to the Lebanese constitution, Parliament's role should transition into that of an electoral body, convening solely to elect a new head of state.

Lebanon has been without a president since October 2022 and despite convening 12 times, lawmakers have been unable to reach a consensus on a candidate.

“I fear if we delay more in passing the legislation, the consequences will be very detrimental on the economy of the country”, Mr Mikati said.

Reforms in Lebanon, which include revamping the electricity sector and streamlining an oversized public sector – often exploited for patronage – have been stalled for years. Despite repeated international calls, the divided political factions have failed to initiate change.

As the status quo endures, there has been in no accountability for a crisis that has pushed over 80 per cent of the population into poverty.

Updated: August 19, 2023, 3:51 AM