Lebanon is on the brink of economic disaster
It was a financial crisis and unpopular taxes that prompted hundreds of thousands of Lebanese to pour onto the streets nearly four weeks ago, demanding a better quality of life. And it is the worsening state of an already stricken economy that is bringing Lebanon grinding to a standstill. Fuel shortages are rife after petrol stations across the country remained closed, with owners complaining they cannot buy enough fuel because of restricted access to US dollars. Together with wheat and medical shortages, no government, and fears among citizens of being unable to access their savings, Lebanon stands on the brink of economic disaster.
A fortnight ago, Lebanese Prime Minister Saad Hariri and his entire government resigned, saying they had reached an impasse. Yet there has still been no resolution or clear way forward from the ruling class, who have failed to appoint replacements or come up with meaningful solutions. Basic services, from a reliable supply of drinking water to round-the-clock electricity, are still a pipe dream in a nation ravaged by decades of mismanagement and corruption.
Drivers have been stranded without fuel this week as numerous petrol stations stayed closed or rationed their sales, unable to withstand the scarcity of dollars used to buy imported fuel. This shortage of foreign currency has only increased the burden on citizens who are already struggling to make ends meet. Some of the owners of fuel stations, who are also bearing the brunt of a broken system, have shunted the extra costs onto customers by illegally hiking the price of fuel by 25 per cent.
Food supplies are also affected. Last month Lebanese millers, who buy wheat from overseas, warned of a national bread shortage caused by the crunch on the dollar.
And Lebanon’s economy took another hit last Thursday when credit rating agency Moody's downgraded Lebanon's three largest banks to junk status, two days after lowering Lebanon’s sovereign bonds rating, citing the lack of credit worthiness of the government. In the latest blow, the credit card firm American Express has told customers it is reducing their credit limits.
This is an untenable situation, further punishing ordinary citizens who are still suffering from a string of government failures. It is a sad reality that when banks opened on November 1 after nearly a fortnight of closure amid the ongoing protests, there was concern about a rush from people anxious to withdraw their savings or transfer them abroad to protect them. To make citizens anxious about whether their savings are even safe in banks is a severe indictment of how ruinous Lebanon’s governance has been – so much so that from 2005 until 2017, parliament could not even agree a formal budget.
Nearly three decades after the end of the 15-year-civil war, the country’s infrastructure, riven by endemic corruption, remains woefully inadequate. There are power cuts of up to 20 hours a day, an unreliable water supply and mounting piles of rubbish in the streets that prompted a 2015 campaign called You Stink, aimed at the inability of politicians to orchestrate proper waste disposal and leaving aggrieved citizens to deal with the stench. It is little wonder the Lebanese felt they had little choice but to march on parliament in protest.
Lebanon has even had to buy electricity from war-torn Syria, a shameful indication of government failures. Yet $11 billion in donor aid, pledged at the Cedre international development conference in Paris last year, remains untouched because Beirut has yet to carry out the necessary reforms, including lowering its deficit and funding infrastructure projects, to unlock it.
Faced with the third-highest public debt in the world and nearly non-existent economic growth, the country was already entrenched in severe financial turmoil even before the October 17 uprising. For the past few weeks, demonstrators have been calling for change and demanding “the return of stolen money”, as some signs held up by protesters have stated, referring to state corruption and the spending that has failed to materialise.
Lebanon has much to offer, from a stunning landscape to some natural resources and a vibrant culture. It is to the detriment of its citizens that so much of that potential is being squandered. The prevailing conditions have gone on too long and cannot be allowed to fester. A situation in which citizens cannot fill their cars, or buy bread or medicine, is indicative of a failed state. Lebanon needs strong leadership to steer it through these troubled times and find a long-term strategy for the revival of a country that has all but collapsed.
Published: November 11, 2019 07:11 PM