Analysis |

Wanted: A Candidate for Prime Minister of Lebanon

Beirut is behaving as though it has all the time in the world to fix Lebanon’s problems. It doesn’t

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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A demonstrator waves the Lebanese flag in front of riot police, Beirut, August 8, 2020
A demonstrator waves the Lebanese flag in front of riot police, Beirut, August 8, 2020Credit: GORAN TOMASEVIC/REUTERS
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

The job of Lebanese prime minister suddenly became available again this week. Mustapha Adib, who was scrambled just weeks ago from the Lebanese embassy in Berlin to form a government, informed President Michel Aoun on Saturday that his efforts had failed and asked to be relieved of his burden.

Adib’s odds were never great. True, he enjoyed the backing of Aoun and of French President Emmanuel Macron, and also, Lebanon desperately needs a government. But even its economic meltdown can’t seem to derail the country’s corrupt political tradition.

The quagmire in which Lebanon is trapped isn’t new. At its center is an elephant in the form of mounting national debt, at present $90 billion; unemployment approaching 35 percent; the need to rebuild Beirut after the explosion at the port on August 4; and promises of aid, that are stuck fast.

Until a proper government forms, that can begin economic reforms, Lebanon won’t get the roughly $11 billion pledged in aid and $10 billion it hopes to borrow the International Monetary Fund. No country or financial institution would give this empty entity so much as a dollar, beyond humanitarian aid for the port blast victims. Now the president has to find a new candidate to form a government, a thankless mission that will also probably end in nothing.

Lebanon's Prime Minister-designate Mustapha Adib gestures after saying that he is stepping down at the presidential palace in Baabda, Lebanon September 26, 2020.
Lebanon's Prime Minister-designate Mustapha Adib gestures after saying that he is stepping down at the presidential palace in Baabda, Lebanon September 26, 2020. Credit: MOHAMED AZAKIR/ REUTERS

There is much concern about the reaction of the public, mainly the half of it that sank to and below the poverty line; the shrinking middle class; and the roughly million Syrian refugees who lack residency rights and work.

Reports in Lebanon about robberies and break-ins, street gangs forming and an increase of weapons purchases for self-defense are multiplying. The Kuwaiti newspaper Alanba reported that prices of guns and rifles in Lebanon have increased by tens of even hundreds of percent. Guns go for over $500, Kalashnikov rifles go for over $1,500, and the market is hot. “People are afraid of being mugged, they’re afraid stores will be broken into, and of being attacked on the street,” said one of the interviewees.

Not a few store owners were forced to close up shop and return to farming, or try to emigrate, mainly to nearby Cyprus. Prices of basics have soared in recent months, partly because dollars are short and the government clapped limits on dollar withdrawals.

One of the steps suggested by central bank governor Riad Salame, the man taking most of the blame for the dire situation, is to distribute food cards among needy citizens while reducing the government subsidies on these products. However, this plan was also put on ice because it doesn’t spell out who is needy, how much money each person would receive, what they are eligible for or the amount by which the subsidies could be cut.

French President Emmanuel Macron, center, visits the devastated site of the explosion at the port of Beirut, Lebanon, Thursday Aug.6, 2020
French President Emmanuel Macron visiting Beirut port, Aug. 6, 2020Credit: Thibault Camus / AP

Nor is it clear what exchange rate would be used when calculating the assistance. Would it be the rate set in the 1990s of 1,515 Lebanese pounds per dollar, the official rate of 3,900 per dollar or the free market rate of 8,000 per dollar? The number of needy families is also controversial. The Welfare Ministry says there are 250,000 such families. The World Bank estimates the total is more than double that number, while Lebanese aid organizations suspect that even the World Bank estimate is unrealistically low.

Nor is life stable at the upper end of the financial scale, in banking circles. Some of the country’s biggest banks have begun to close branches in other Arab countries or sell them to other banks. Arab and international banking institutions are no longer prepared to accept guarantees and commitments by Lebanese banks in order to provide supplier credit. When 2020 began, the extent of doubtful debt was 25 percent of all loans. Now it’s over 40 percent. Much of the collateral held by banks is property, where values are plunging because of the economic travails. There is grave fear that the banks won’t be able to realize that collateral when loans sour.

According to in-depth research published in the Iraqi newspaper Zaman, about 1.3 percent of Lebnon’s biggest borrowers took about half the loans the banks extended. Meaning, most of the lending is concentrated among major companies and corporations whose collapse could undermine the entire banking industry. Moreover, there are no exact figures for the extent of collateral and the ability to realize it. It seems that a large part of the loans were unsecured except for a wink and a nod by politicians and associates. That is also why one of the basic conditions that the French president set for arranging financial aid for Lebanon was putting its house in order, including through a thorough and transparent investigation of central bank activity. The Lebanese government indeed hired the services of an American consulting and financial investigation company but the extent of its cooperation with the firm so far is unclear.

Meanwhile, Lebanon is being run as if it has all the time in the world. It relies on Macron’s promise not to abandon the country, but even the French president won’t be able to run the country in place of the Lebanese.

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