Lebanese economy teetering on the edge

It is a dire situation in Lebanon. The economy is teetering on the edge. There is an acute bread shortage, and people are on the brink of no food in the month of Ramadan, the holy period of fasting. Lebanon’s Economy Minister Amin Salam said the government would disburse $15.3 million to the importers to get over the bread shortage crisis. “This will give us a period of two to three weeks before we need to open another credit line, which we had requested at $21 million.” Amin Salam said that the government would not be lifting the bread subsidy but will seek $150 million agreement with the World Bank to support food security. He confessed that the government was in no position to subsidise anything, including bread. Lebanon has not recovered from the economic crash of 2019 and in the meanwhile has been embroiled in a political crisis as well. The Lebanese pound has lost 90 per cent of its value and the food prices have increased eleven fold, according to United Nations’ World Food Programme. Lebanon is largely dependent on food imports and pays for them in dollars.

After a year of strained relations between Lebanon and the Gulf Cooperation Council (GCC) countries, the ambassadors of Saudi Arabia and Kuwait returned to Beirut. Saudi Arabia Ambassador Waleed Bukhari hosted a dinner at his residence on Monday, which was attended by Lebanese Prime Minister Najib Mikati, Lebanese political allies, Hezbollah-backed Agriculture Minister Abbas Hajj-Hasan, and the ambassadors of the United States, the United Kingdom, France, and Germany. Observers see this as the great thaw between Lebanon and its Arab neighbours. General elections are due in Lebanon in May.

Lebanon then is facing the twin crises on the economic and political fronts. And the two are interconnected. Political stability will enable the leaders of Lebanon to grapple with the economic crisis with greater clarity and resolve. Saudi Arabia has once been a consumer of Lebanese luxury tourism industry but that has faded away with the charges of Lebanon smuggling amphetamine tablets into the Gulf countries and the growing influence of Iran-backed Hezbollah. Lebanon’s Energy Minister Fayad said, “The relationship that brings us together is exceptional through common interests when it comes to economy, finance, services, and even Arab unity. I think the natural course of ties between Lebanon and Arab countries is for them to flourish, especially with the Gulf countries.”

Imad Salamey, associate professor of Middle East political affairs at the Lebanese American University said, “Anti-GCC rhetoric has ended, the Lebanese government has pledged to seek positive relations and cooperation [with Gulf countries], and it has cracked down on [drug] smuggling operations. I believe the government of Lebanon has taken various refraining steps to the satisfaction of the GCC.” It is clear that experts in Lebanon feel that Beirut mending fences with its Arab neighbours is necessary for its economic revival as well. It may not be easy given the demographic equations within Lebanon.

Unlike in Sri Lanka, where an economic crisis has triggered a political crisis, in Lebanon it seems to be the other way round. The political crisis has led to an economic crisis. And the lack of political unity will come in the way of finding solutions to the economic problems facing the country. Lebanon was once considered economically the most dynamic country, with its sophisticated financial services and the ability of its people to adapt to the ways of a modern service economy. But political factionalism has destroyed the economic dynamic. It is a long trek to economic prosperity for the Lebanese. The people at large are disillusioned with the politicians and their corrupt ways. The people are looking for honest leaders.