Lebanon sinking into an abysmal abyss - GulfToday

Lebanon sinking into an abysmal abyss

Lebanon

The terrible consequences of years of economic mismanagement in Lebanon have become obvious in recent months. Reuters

Lebanon’s plight is not just piteous but shocking, to say the least. The reported wrangling among the politicians has dealt a body blow to the economy, with the currency losing a disastrous 90 per cent of its value and inflation spiralling sky-high.

To make matters worse, the nation has defaulted on its debts, and banks have all but cut clients off from their dollar deposits.

It has pushed millions into suffering on the breadline; already there are two million vulnerable Syrian and Palestinian refugees grappling with extreme poverty.

The situation has been exacerbated by the increase in coronavirus cases.

Lebanese authorities have been searching for hazardous material around the country after a deadly explosion in Beirut last year. The Aug. 4 blast of nearly 3,000 tonnes of ammonium nitrates, a highly explosive chemical used in fertilisers, killed 211 people.

An investigation into the explosion has stalled since the country’s prime minister was charged with criminal negligence in December.

Lebanon’s economy is inextricably intertwined tied to the economy of neighbouring war-torn Syria, which heavily relies on the Lebanese banking sector.  And there are no signs of any of the extreme pressures easing up for Lebanon.

The country’s caretaker government has had to impose a three and a half week round-the-clock curfew — one of the world’s toughest lockdowns — to try and stem the spread of COVID-19. But the absence of vibrant financial support programmes has triggered nationwide hunger demonstrations. In Lebanon’s poorest city, Tripoli, there have been bloody clashes between protesters and security forces.

Since lockdown measures were controversially lifted during the Christmas season, Lebanon’s daily COVID-19 caseload has broken the country’s records. Now 300,000 people have been infected and more than 3,000 have died. The mortality rate from virus cases is climbing.

Scenes of shoppers brawling over scarce goods, protesters burning tyres to block roads, and hundreds of shuttered businesses are now commonplace. A vibrant Beirut has turned into a ghost town in eerie darkness, as the outgoing energy minister warns that a total blackout is looming as fuel for electricity runs out.

The most optimistic scenario would see a capable government, able to regain local and international confidence, and implement reforms international lenders have demanded, such as an overhaul of the wasteful power sector, audit of the central bank and restructuring of the bloated public sector. The remaining foreign exchange reserves estimated at $16 billion are draining away: with roughly $500 million a month on fuel, wheat and medicine subsidies; $75 million to $100 million a month spent by the state, and at least $100 million a month when the Central Bank intervenes in the currency market.

Some officials, diplomats and politicians are inclined towards pessimism: “I don’t think the parties want a solution,” a senior official source said.

Dan Azzi, former chief executive of Standard Chartered Bank in Lebanon, said a scenario could evolve in which the currency tumbles further, all basic functions of government cease to exist and chaos spreads.

“If we continue like this...total control will be lost on society. This means you are driving down a road and someone with a weapon can stop you kill you, take your car, money and wife.”

The only hope for Lebanon might once again be a bailout from foreign nations. French president Emmanuel Macron, who had been spearheading international efforts to rescue Lebanon, has said this week he will visit the nation for a third time since the August blast.

Already Lebanon’s largest Christian bloc, the Free Patriotic Movement (FPM), warned prime minister-designate Saad al-Hariri on Saturday against sidelining President Michel Aoun and other parliamentary interests in talks over forming a cabinet. Without a government in place, it is hard to see how money will flow in given that most foreign countries have vowed to condition aid on reforms that cannot be delivered by a caretaker cabinet.

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