Beirut; New wave of protests

Hundreds of demonstrators angered by a deepening economic crisis rallied across Lebanon. Protesting against the surging cost of living and the government’s apparent impotence in the face of Lebanon’s worst economic turmoil since the 1975-1990 civil war, protesters in central Beirut brandished flags and chanted anti-government slogans.

Lebanon, a sectarian democracy with 5.5 million people, has been mired in intertwined political and economic crises since protesters took to the streets last fall to denounce the country’s leaders for decades of mismanagement and corruption.

Those protests forced the resignation of Prime Minister Saad Hariri in October but petered out in March amid a government-imposed lockdown aimed at preventing the spread of the coronavirus.

The lockdown accelerated the country’s economic decline. Businesses have closed and unemployment has spiked as the government has cascaded toward insolvency. In March, it failed to make a $1.2 billion payment for foreign bonds, the first such default in Lebanon’s history.

A new government led by Mr. Diab, who was sworn in in December, is in talks with the International Monetary Fund over a multibillion-dollar aid package, but there are no signs of an imminent agreement.

Much of the public anger has focused on the banks, which have imposed tight restrictions on dollar withdrawals, and on the collapse of the Lebanese pound, which the government had kept pegged at 1,500 to the dollar for decades, permitting Lebanese to use the two currencies interchangeably.

But the pound’s value has been dropping on the black market for months, and on  June 11, Thursday reached a new low: more than 5,000 to the dollar. That is a 70-percent drop in value since October.

June 11 protests appeared to be a spontaneous burst of anger from citizens who have watched the government repeatedly fail to carry out reforms while the value of their salaries and savings has dropped.

What’s driving the protest

Since Lebanon’s 1943 inception, powerful and corrupt sectarian elites have monopolized political power and a disproportionate share of the economic pie, using patronage networks to maintain followers. Beirut’s political system apportions positions and power based on sectarian affiliation, and the inability of leaders from different sects to come to a consensus hurts the government’s ability to address challenges.

Today, the Lebanese suffer from many afflictions: an insufficient voice in government, a lack of government transparency, limited economic opportunities, corruption, nepotism, and poor quality of life. Lebanon’s infrastructure is crumbling, and the Lebanese experience daily electricity outages, garbage piled up in the streets, sporadic water cuts, and environmental degradation. Since October 2019, protesters have taken to the streets to blame the sectarian political system for their economic plight and demand a complete replacement of Lebanon’s political system and leadership.

The protests ceased as the country went into lockdown over the pandemic of a novel coronavirus disease, COVID-19, but difficult living conditions exacerbated by the COVID-19 response reignited the protests in late April. Lebanon is suffering what is likely its worst-ever financial crisis. There is a dollar shortage, which in turn has seen the Lebanese pound lose more than 50 percent of its value on parallel markets in the past six months. In that time, banks some of which are on the verge of collapse have limited withdrawals of the Lebanese pound and entirely phased out withdrawals in the foreign currencies the Lebanese use to pay a variety of obligations, such as mortgages and tuition.

Coronavirus-related restrictions have added to systemic economic problems, pushing the unemployment rate to over 30 percent and reducing incomes and economic activity. Multiple humanitarian organizations have warned of food insecurity.

Can Lebanon solve these problems on its own?

Lebanon’s draft rescue plan acknowledges that “it is difficult to imagine Lebanon coming out of such a deep crisis without the support of the international community.” Beirut lacks foreign reserves to back up its extensive debt and historically has lacked the strong leadership capable of imposing austerity and reforms, such as an official devaluation of the local currency, a tax hike or a reduction in subsidies, and a restructuring of the bloated public sector. Moreover, given the debt default and Lebanon’s record of corruption, Western states and private creditors likely are understandably reluctant to invest in the country. Gulf Arab states that historically supported Lebanon have withdrawn their support because they oppose the regional behavior of Lebanon-based Hezbollah, the Iran-aligned Shiite Muslim militant group and political party, and they are unlikely to restore it in the near term.

The country’s postwar economic record is instructive. Lebanon maintained an uneasy equilibrium between the sectarian factions that fought the country’s bitter civil war (1975–91), and this balance required graft, remittances from abroad, and a semblance of economic growth to survive. Remittances pay for the pound’s peg to the dollar, which was initially put in place in 1997 to provide currency stability while the government enacted economic reforms. But instead of following through on reforms, the Beirut government “financed artificially inflated salaries and lifestyles for over twenty years.”

Lebanon’s only answer is to commit to restructuring irrespective of the pain it causes to the general public and to many stakeholders, particularly overindulged politicians as a precondition for receiving the external funding it so desperately needs to stabilize the economy.

There is some uncertainty, however, about whether Lebanese leaders can make the difficult decisions necessary. Hezbollah reportedly opposes IMF programs and, with the crisis in full bloom by March, Wazni also seemed doubtful of whether Lebanon would accept standard IMF terms for a deal and whether Lebanese political consensus could be reached.

By Sanjida Jannat

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