- ARAB NEWS
- 26 Apr 2024
Since 1975
Friday marks the first anniversary of the assassination of Lokman Slim, a well-known Lebanese Shiite publisher and commentator and a frequent critic of Hezbollah. His family and others have blamed Hezbollah for his murder. A year later, no one has been charged with Slim’s killing. The official investigation is still ongoing, but it is not likely to lead to results any time soon. His case will probably join countless other assassinations attributed to the terror group that the authorities have failed to prosecute.
The Lebanese government’s failure to find those responsible for Slim’s murder and other political crimes is just one manifestation of how the country is becoming a failed state, unable to manage its economy or control its territory, while abdicating its sovereign responsibilities to Hezbollah and its allies.
The Beirut port explosion in August 2020 is another case where those responsible are yet to be held accountable, despite the massive devastation it wreaked on the city, causing at least 218 deaths, 7,000 injuries and $15 billion in property damage, while leaving an estimated 300,000 people homeless. Instead, Hezbollah and its allies have stymied the official investigation and sought to replace those handling it.
Drug trafficking is another example. Hezbollah and its partners in crime freely use Lebanon’s territory and ports to grow, manufacture and export drugs, including to the Gulf states and nations in Europe, Africa and the Americas.
Hezbollah, with the acquiescence of like-minded political groups, has embroiled Lebanon in Syria, Yemen and Iraq, breaking both Lebanese and international laws regarding military interventions.
At the same time, politicians have been sapping Lebanon’s meager resources and squandering what is left of Lebanon’s treasures, including foreign aid and the central bank’s resources. According to the World Bank, Lebanon’s elite “commands the main economic resources, generating large rents and dividing the spoils of a dysfunctional state.”
Many of those leaders are protected by Hezbollah and its coalition partners, who have paralyzed what is left of Lebanon’s governing structure, including the Cabinet, which has not met in months, precisely because of differences on how to save the economy and restore some semblance of authority.
The World Bank last week issued an unusually blunt report on Lebanon’s economy, blaming its ruling class for causing one of the world’s worst national economic crises by plundering the country’s resources and abusing their positions of power. It stated: “Lebanon’s deliberate depression is orchestrated by the country’s elite that has long captured the state and lived off its economic rents… It has come to threaten the country’s long-term stability and social peace.”
Lebanon’s officials have heard these facts and exhortations many times before, from the World Bank, International Monetary Fund and the UN, the last of which maintains a significant regional hub in Lebanon. They have also heard them from Gulf Cooperation Council and Arab officials, as well as from France, the EU, the US and other traditional partners of the country.
A combination of mismanagement, corruption and a failure to deal with COVID-19 and its repercussions have dragged Lebanon’s economy down over the past two years. In 2021, its gross domestic product plummeted to less than $22 billion, according to the World Bank — a sharp drop of more than 58 percent from its 2019 level and probably the greatest shrinkage of any economy worldwide in such a short time.
While Lebanon’s elite thrives, the poor get poorer and the middle class is shrinking fast. Millions have been pushed into poverty over the past few years. The World Bank expected the number of people below the poverty line to rise by 13 percentage points in 2020 and another 28 percentage points by the end of 2021.
Government revenues have also shrunk by almost 50 percent, registering less than a 7 percent share of the country’s GDP in 2021 — one of the lowest ratios in the world, comparable to Somalia’s.
Lebanon’s finances have been in a shambles for some time and its government debt to GDP ratio now exceeds 180 percent, which is one of the highest levels in the world, and it has no prospect of being able to repay its debts any time soon. Lenders are shying away from providing new funds to the country, especially after it officially defaulted in March 2020, when failing to repay a $1.2 billion Eurobond. It was the first sovereign default in the country’s history, but more are likely unless its economic management is altered.
The drastic reduction in capital inflows, a large current account deficit and mismanagement at the highest levels of Lebanon’s central bank are all eroding its reserves. As a symptom of this economic malaise, the Lebanese pound has lost more than 90 percent of its value since 2019. The collapse of the exchange rate has especially affected the poor, retirees and others living on fixed incomes denominated in Lebanese pounds. To give an example, a family with a monthly income equivalent to $1,000 in 2019 has now been reduced to an income of just $100 a month, leading to a drastic increase in the number of those classified as poor.
While the country’s elite thrives, the poor get poorer and the middle class is shrinking fast.
Dr. Abdel Aziz Aluwaisheg
What is new in the World Bank’s report is that it provides clear evidence that Lebanon’s failures have been inflicted by its own political leaders, who have failed over the past two years to agree on a credible path toward economic and financial recovery. “Deliberate denial during deliberate depression is creating long-lasting scars on the economy and society,” Saroj Kumar Jha, the World Bank’s regional director, said last week. Not mincing his words, he added: “Worryingly, key public and private actors continue to resist recognition of these losses, perpetuating the zombie-like state of the economy.”
Lebanon last week resumed talks with the IMF, hoping to secure a bailout. Those discussions have been ongoing for years. However, without signs of a credible program to achieve the economic reforms sought by donors, it is doubtful that such a bailout will be forthcoming.
With very little time left before an economic meltdown, Lebanon is best advised to heed the counsel of international organizations, lenders, donors and old partners, including Dr. Ahmed Al-Sabah, foreign minister of Kuwait, a country that has stood by Lebanon through the years. He visited Lebanon last month and delivered helpful proposals to rebuild the country’s frayed ties with its friends. Only with that can it hope to reverse its misfortune.
