Lebanese will die of hunger if there is no bailout

After four days of violent confrontations between Lebanese soldiers and civilians protesting the government’s failure to tackle the country’s economic collapse, Beirut finally adopted an economic rescue plan.

There was no time to lose. While shouting protesters gathered outside the Central Bank in Beirut, angry mobs armed with stones and Molotov cocktails attacked banks in the port cities of Tripoli, Sidon and Tyre.

For most Lebanese, banks have become symbols of inequality and privation because the Lebanese lira has plunged from 1,500 to 4,000 to the US dollar, devastating savings and salaries of the employed.

The return to the streets in Beirut and a dozen other cities and towns followed the lifting of coronavirus restrictions on movement and easing of commercial closure.

Demonstrations morphed into riots when troops attempted to quell protesters with tear gas and rubber bullets and live fire. Fearful of violent escalation, the government of technocrats announced the plan after the politicians — who brought about the country’s collapse — made minor amendments.  Perhaps to show they remain relevant.

The government had consulted with the International Monetary Fund (IMF) on the shape of the plan with the aim of securing $10 billion in finance and has formally requested $10 billion from the IMF. Beirut also hopes the plan will free up $11 billion in aid pledged by international donors in 2018. Receipt of funding could put the country on the way to recovery. Economists predict that the country will need $80 billion to exit the crisis.

Funding depends on the adoption of major economic and political reforms and anti-corruption measures. In a bid to meet requirements, the parliamentary Finance and Budget Committee has adopted two reform bills which failed to receive the approval of the House last month. This legislation will have to be not only passed by deputies but also implementation must proceed before Lebanon will receive funding. No one is going to put money into Lebanon – where aid money simply disappears — until this happens however dire the situation.

For years — even decades — the country’s sectarian politicians have blocked both economic change and political reform as they have exploited the confessional system of governance for financial gain. They can no longer hope to carry on with obstruction. Without an international bailout and political reform, Lebanese will die of hunger.

They took to Lebanon’s streets and squares in mid-October to demand an end to mismanagement, corruption, and the sectarian model imposed on Lebanon by colonial France before independence in 1943. The triggers setting off demonstrations were limits placed on withdrawals from banks and a daily tax on free internet phone calls. Instead of listening to the voices of the largely peaceful protesters, the political elite procrastinated and prevaricated.  At the end of the month, Prime Minister Saad Hariri resigned after he was not permitted to appoint a cabinet of technocrats.  It took until January 21st of this year for the politicians to accept such a government under Hassan Diab, an academic lacking the backing of his Sunni community. And, it has taken until the end of April for him to negotiate a plan to rescue Lebanon’s economy and secure the acceptance of warring political factions. They have lobbied unsuccessfully for an amnesty law which would absolve them of illegal enrichment and tax evasion.  Lebanese want accountability.

The coronavirus lockdown paused protests for more than a month, raising the hopes of the political elite that the “revolution” had come to an end. Once the number of daily coronavirus infections had been reduced to single digits and restrictions eased, Lebanese returned to the streets. The army and security forces responded with beatings, rubber bullets, tear gas, and live fire. The army command accused “infiltrators” of stirring up violence.

Human Rights Watch (HRW) charged the army of using “excessive, including lethal force” after a man was killed in Tripoli, the hub of the protest movement. HRW warned that “more than half of Lebanon’s population may be at risk of hunger if the government does not urgently carry out a robust assistance plan.” This is beyond Lebanon’s slender means unless and until it receives external funding.

There is no time to waste. The government has to move quickly and decisively to meet the requirements of the IMF and a group of international donors. Hundreds of thousands of Lebanese have lost jobs during the lockdown and are unlikely to regain employment any time soon. They and their families could go hungry because they have no income.  Lebanon is dependent on the import of essential food, medicines, and fuel. Since 2011, food security has become a major issue. According to the World Bank, food accounted for 18 per cent of total imports.  This included 80 per cent of cereals and 100 per cent of rice, refined sugar, and vegetable oil.  As a result of the collapse of Lebanon’s currency and the severe shortage of foreign exchange, prices of food, in particular, have soared. Meanwhile remittances sustaining poor and middle class families have dried up due to falling income among expatriate members.

Lebanon’s economy was always based on a hope and a prayer.  During the “good old days” of the 60s and, even, the early 70’s, Lebanon thrived by exporting fresh fruit and vegetables by air to the Gulf countries and Saudi Arabia.  Lebanese of all backgrounds travelled abroad to work at jobs paying better wages than they could secure in Lebanon. Their families depended on remittances they sent home.

Lebanon not only relied on imports of essential comestibles – wheat, rice, sugar, etc. — but also people — visiting expatriates and tourists, especially from the Gulf and Saudi Arabia who sought to escape summer heat to cool Lebanese mountain resort towns. Beirut’s international airport became a hub for flights from Europe to the region and further afield. Hotels, rental apartments, restaurants, cafes, shops, and other services thrived on the summer hospitality surge. Lebanese banks thrived on deposits of foreign currencies by regional citizens and businesses.

The civil war (1975-90) halted exports, reduced imports of food and other goods, halted tourism, and ended Lebanon’s role as a regional banking centre.  Lebanese fled the country for safety and jobs and continued to send money to family at home. Lebanon partially revived after the civil war ended but its governments focused on constructing high-profile projects rather than repairing damaged and devastated infrastructure. Consumption based on imports and borrowing continued at a higher rate than the economy could sustain.

After three decades, electricity has not been restored, potable water is in short supply, raw sewage pollutes  the sea, and rubbish landfills are overflowing. Lebanon’s debt rose to become the third highest in the world. When Lebanese revolted last October the entrenched political elite failed to address their demands. Coronavirus-driven deprivation and violence has finally forced recalcitrant politicians to capitulate to reform and IMF management. It remains to be seen if they will cooperate when the time comes for implementation.