Tag: hassan diab

Lebanese Banking Sector ‘Unwilling’ to Reform

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On Thursday, June 18, Lebanese financial adviser Henri Chaoul resigned from his role in negotiations with the International Monetary Fund (IMF.) The adviser of the Lebanese Ministry of Finance expressed his exasperation with the Lebanese banking sector.

“I have come to the realization that there is no genuine will to implement either reforms or a restructuring of the banking sector, including the Central Bank,” Chaoul said in a statement.

The adviser accused Lebanese authorities, including politicians, central bank officials, and representatives of the Lebanese banking sector of dismissing the “magnitude” of Lebanese losses and accused all actors of embarking on a “populist agenda,” according to Reuters.

The government of Prime Minister Hassan Diab had introduced a plan based on government projections of losses amounting to $83 billion in the banking sector alone. The plan’s estimations of losses presented the first quantitative diagnosis of Lebanon’s intertwined crises that have led to rapid hyperinflation and rapidly falling living standards for Lebanese people.

Fundamental disagreements

Chaoul and the IMF appear to agree with the magnitude of the losses estimated in the prime minister’s plan, but Chaoul implied that the banking sector, including its central bank and a parliamentarian fact-finding committee, had presented very different numbers, challenging the government’s estimates. The failure of Lebanese officials to agree upon the scale of its losses amounted to a “dismissal” of the true problem, according to the adviser.

The former Lebanese finance minister and current Speaker of Parliament Nabih Berri said that the government estimates had been drawn up in a rushed manner that had led to mistakes and wrong assumptions. He told Lebanese broadcaster MTV that Lebanon would be unable to pay its bond obligations until 2043 as politicians aim to reach a compromise on the true number of losses.

The IMF itself has highlighted that the uncertainty over the true scale of Lebanon’s financial woes is a major stumbling block in the ongoing negotiations, calling for a “joint diagnosis” to establish a transparent diagnosis on which to base its talks.

“Lebanon needs to reach a common understanding of the source and size of its financial losses,” IMF spokesman Gerry Rice stated on the IMF website, calling the issues “complex.”

Reforms

The IMF will only provide support if the Lebanese government is willing to implement broad reforms, which could prove unpopular. “There is a need for comprehensive reforms in many areas, which requires acceptance and consensus from the society as a whole,” Rice stated.

But many fear the IMF will require unpopular neoliberal reforms that aim to cut public spending that could face significant resistance from Lebanon’s increasingly destitute population.

Public resistance to IMF demands for reform is highly likely as the IMF is a proponent of the “Washington consensus” that calls for cutting public spending, shifting taxation onto the poor, liberalization of banking, deregulation, and privatization.

Many countries who have followed IMF reforms have only seen their populations further impoverished as public spending is cut to allow for foreign debt repayments while halting growth and inflation.

US ambitions to weaken the influence of Hezbollah in Lebanon and neighboring Syria have resulted in tough sanctions, the Caesar act, which came into effect on June 17. The sanctions are aimed at Syria but will gravely impact Lebanon, which is one of the few remaining nations to trade with Syria.

The role of the US in further worsening Lebanon’s economic prospects in the midst of its interconnected health, economic, and financial crises has led some to urge the country to find funding from China instead.

Chinese alternative

China has been eager to work with Lebanon, as it sees its ports in Tripoli as an important possible link in its Belt and Road Initiative that aims to connect Europe with China through an ambitious infrastructure project that spans the historic silk route.

Hezbollah’s leader Hassan Nasrallah on June 16 announced that China is ready to invest in Lebanon’s infrastructure.

“Chinese companies are ready to inject money into this country,” Nasrallah stated on Hezbollah’s television network Al-Manar. Nasrallah argued that China would easily match the $10 billion sought from the IMF, with few of the painful reform demands.

While inviting Chinese investment could significantly boost Lebanon’s economic prospects, it would risk the ire of the United States who could apply sanctions to cripple the economy as it is currently doing in Iran and Syria.

Accepting IMF reforms would likely spark further popular unrest, while accepting Chinese investments could trigger a diplomatic conflict with the US. Even if Lebanon had a functional and effective government, the country is left with few good choices to resolve the suffering of its people.

MENA Region Faces Wave of Post-Lockdown Protests

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Citizens of several countries in the Middle East and North Africa (MENA) have taken to the streets following the easing of COVID-19 measures. Citizens are demanding action from their governments after having adhered to painful lockdowns and curfews that brought severe economic hardship.

In Lebanon, Iraq, Syria, and Tunisia, large protests have emerged over the last week as citizens call upon government officials to ease their suffering. While COVID-19 fears begin to wane, a new focus on structural poverty and inefficient government is emerging across the region as protesters express their discontent.

Lebanon

The Lebanese military arrested dozens of protesters on Monday, June 15, for alleged acts of vandalism. Protesters expressed their frustration with skyrocketing inflation amid a spiraling currency crisis, while the indebted nation struggles to balance its debt obligations with popular demands for a significant increase in living conditions.

After nearly two months of empty streets, economic deprivation, and fear of the coronavirus, the Lebanese people have returned to the streets to protest the lack of solutions offered by the government of Hassan Diab. Banks and shops were attacked as Lebanese people grow more desperate, even as new sanctions on neighboring country Syria are likely to further damage Lebanon’s economy.

Iraq

Newly inaugurated prime minister Mustafa al-Kadhimi’s “honeymoon phase” in government has ended quickly as increasing austerity measures are sparking furious protests. Monthly pensions were hit by a drop in oil-revenue that is forcing the government to take unpopular measures. Nearly one million Iraqis depend on their pension each month and this month the $920 pension was more than $100 short, according to France24.

The Iraqi government has introduced several ambitious reform plans, but a dramatic fall in government revenue as a result of cratered oil prices and production cuts has meant introducing painful cuts to public sector salaries and pensions. Public sector employment has served as a method to appease Iraqis since the 2003 US invasion, but falling state oil revenues have now undermined this strategy.

Syria

Syria has seen few large protests since the 2011 pro-democracy protests that started a civil war. But protests again emerged over the rise in prices of basic necessities, a doubling in food prices and continued corruption in government. The city of Druze saw four days of intense protests as the Syrian Pound continues to fall dramatically in value.

The protesters are unlikely to see a swift resolution to their concerns as the “Caesar Act,” a new round of US sanctions targeting Syria, is set to heavily impact the last remaining economic activity that has sustained the country’s flailing economy. With an apparent consolidation of power ongoing in Damascus that has gone public, Bashar al-Assad’s regime is facing renewed pressure from all sides.

Tunisia

Protests have emerged in at least seven Tunisian cities, Reuters reported on Thursday, June 18. Unemployed and economically deprived people across the country protested what they considered government inaction in the face of a continued economic crisis. University graduates shouted “we need jobs” in Gafsa and hundreds protested in Hajeb el Ayoun and Sidi Bouzid.

The Tunisian tourism sector has suffered an unprecedented crisis after COVID-19 measures closed borders and shut the industry that provides 10% of state revenue. After a decade of high inflation and unemployment, Tunisians now call for an increased focus on jobs by protesting and even halting the country’s phosphate production through sit-ins.

A new era

The current protests across the MENA-region are likely only the beginning of popular unrest in the region, with global institutes like the IMF predicting that local economies will suffer from post-lockdown economic woes for some time to come. Protests against corruption and ineffective government appear to be supported by data, and the World Bank has called for greater transparency from MENA-governments.

As global oil prices continue to be volatile, supported by painful production cuts, revenue will likely remain impacted in many oil-dependent MENA-countries. With structural economic issues in many countries, unemployment and poverty are likely to worsen in the months ahead, as the region braces itself for a new era of popular discontent.

Protests Rage On in Lebanon

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The Lebanese pound has lost a quarter of its value over two days and unemployment soars as the Lebanese become increasingly destitute, prompting another night of angry protests.

Protests rage

Angry protesters blocked roads across the country, with burning tires sending pitch black smoke into the night’s skies. What the protests lacked in size, relative to some of the mass demonstrations seen before the pandemic, they made up in intensity, hurling stones and fireworks at police who responded with tear gas and rubber bullets.

An announcement by the Lebanese central bank that it would inject more foreign currency into its market to stop the free-fall of the Lebanese Pound did anything but calm tempers. The Lebanese are exasperated by what they see as inefficient amateurism in government. Protesters appear to have little faith in their government’s ability to find a solution in coming talks with the International Monetary Fund (IMF).

Comprehensive reforms

Banks were a major target with several branches damaged or set alight as the Lebanese have few avenues left to convert righteous indignation into positive change for the country. The government of Hassian Diab is coming under increasing pressure as its promises of rapid reforms are yet to materialize.

Fears exist that the coming negotiations with the IMF will bring the painful austerity that usually accompanies assistance provided by the neoliberal institute. A Bloomberg reporter on June 4 asked the IMF, “In Lebanon it’s said that the IMF is asking to decrease government expenditures, will these costs of reforms fall on the poorest?” This prompted the IMF’s Communication Director, Gerry Rice, to vaguely emphasize the importance of “the right diagnostic and the right set of comprehensive reforms.”

Looming sanctions

The Lebanese appear to be completely justified in their frustration as further economic woes are on the horizon, a tie purposely made by a foreign actor. The US “Caesar Act,” a package of sanctions on Lebanon’s northern neighbor Syria, is about to destroy a large part of the country’s remaining international trade.

The sanctions are intended to cripple Hezbollah and perceived Iranian influence in the region, but they do so by attempting to impoverish the local population into revolt. For both Syria and Lebanon, trade with their neighbor has provided a fragile lifeline as both countries face a currency in free-fall that resulted in skyrocketing prices for basic necessities and food.

With few positives to look forward to and any optimism drained by an inefficient government, the Lebanese protests are set to continue as the people voice their exasperation with an increasingly worrying collapse of Lebanon’s future prospects.

Tensions Ease in Lebanon After Weekend of Sectarian Clashes

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On Saturday, protesters in Lebanon returned to the streets for the first time since the country lifted COVID-19 restrictions. 

What started as peaceful marches protesting the country’s economic crisis, fuelled by endemic corruption, descended into worrying sectarian clashes decried by Lebanese politicians, religious leaders, and the army as a “dangerous ordeal” planned by certain factions. 

The country’s leaders unanimously condemned the slip into sectarianism, and invoked memories of Lebanon’s bloody civil war to warn against further aggression.

Leaders Condemn Saturday’s Violence 

The Army Command released a statement on Sunday calling the Sunni-Shia violence a “dangerous ordeal” and warning Lebanese citizens “against being dragged into strife.” It reported 25 soldiers were injured on Saturday, and vowed to “preserve civil peace and protect national unity.” 

Calls for disarmament for Iranian-backed Hezbollah appeared to trigger sectarian violence after some counter-demonstrators insulted the Prophet Mohammed’s wife Aisha and other historic Sunni figures, inflaming Sunni-Shia tensions.  

The military and security services intervened to prevent Hezbollah and Amal counter-demonstrators clashing with protestors in downtown Beirut, but gunfire and scuffles broke out in neighborhoods across the capital.  

Parliamentary Speaker Nabih Berri used colourful language to decry the events, declaring the sectarian violence “a strife that is more severe than killing!” 

“Cursed be the one who awakens it, so beware of falling into its furnaces, for it will spare no one,” Berri chastised, while also condemning insults against Islamic or Christian symbols or sacred places. 

On Monday, Interior Minister Mohamed Fahmi announced the violence had been “intentional and premeditated,” and required further investigation.  

“We had strong indicators that a fifth column could interfere in the demonstrations to trigger tension and sedition, and this is exactly what happened,” Fahmi told Lebanese daily al-Joumhouria on June 8. 

“It is inadmissible to trigger sectarian strife, no matter what it costs,” said the interior minister, who has also backed up the military’s assurances the situation is now under control. 

“Saturday’s incidents were a big shock to all political parties who must join efforts to protect the country. What happened has dangerously stirred strife and sedition, putting the fate of the nation and Lebanese at stake,” unnamed political sources also told al-Joumhouria. 

Protest Movement’s Future Endangered? 

Hezbollah supporters, who planned to protest US interference in Lebanese politics by demonstrating outside the US Embassy in Beirut on Sunday, abandoned the demonstration in the wake of Saturday’s unrest. Political commentators were quick to defend the protest movement, telling Arab News it will push ahead despite Saturday’s events.  

“Indeed, people are repulsed by what happened, but it will not prevent them from taking to the streets again to demand their rights,” commentator and public affairs academic Dr. Ziad Abdel Samad told Arab News on June 7.

“What happened on Saturday will not eliminate the civil movement, which is committed to its demands and to pressuring for the reestablishment of the authority by forming a government with powers that allow it to draft a new electoral law, as happened in Tunisia.”

A report from Brussels think-tank the International Crisis Group (ICG) agreed that the protest movement is critical and must continue to exert pressure on the government and elite to institute reform.

The June 8 ICG report states that “the current Lebanese government, and any government that may follow it, will have to carry out substantial structural and institutional reform to put the country’s fiscal and economic system back on a sound footing.”

“To succeed, such structural change will have to put an end to the political model in which corrupt and self-serving cliques appropriate and redistribute state resources and public goods,” the report added. 

It is, however, highly unlikely the Lebanese elite, who have grown rich on the current status quo of corruption and wildly unbalanced wealth distribution, will pragmatically put their own interest aside in order to save Lebanon from economic collapse.  

“It is very hard to imagine that they (Lebanon’s ruling elite and political class) will do so unless the Lebanese who have gone into the streets since October 2019 find ways to exert sustained pressure on the country’s political institutions,” the report concluded. 

Disarmament Calls and Government Stability 

It is not the first time protestors have called for Hezoballah to disarm, and political commentators remain divided about what really triggered the weekend violence. Some argue it signals a new stage of the protests, while others believe it is the beginning of the end for Hassan Diab’s government. 

Public affairs expert and activist Dr. Walid Fakhreddin believes the sectarian strife is symptomatic of the Diab government’s impending decline.  

“Hezbollah previously caused such tensions four or five times since the protests started on Oct. 17. However, this is the first time this happened under the government of Hassan Diab. This means that Diab’s government is in crisis, and this is Hezbollah’s way (of operating) when it does not want a government to continue,” Fakhreddin explained on June 7. 

According to Fakhreddin, “no one is ready to stand up to Hezbollah” and demand disarmament, while the current government “is unable to continue and will not manage to obtain funds to prevent economic collapse.”

“What happened is new. It is not an extension of Oct. 17, but rather it will mark the start of a new stage,” says political analyst Ghassan Hajjar. He agrees that Hezbollah is feeling the heat of disarmament calls, but argues it will not topple Diab’s government unless it receives assurance that former Prime Minister Saad Hariri will be reinstated.  

“No one won on Saturday — not the government, the Hezbollah nor the protesters. Everyone lost,” Hajjar concluded, a sentiment shared by many in Lebanon at present. 

It appears that for the time being, the shock of sectarian clashes on Saturday and united condemnation from Lebanon’s political, religious, and military leaders has quelled Sunni-Shia tension. The painful memories of civil war seem to have given actors across Lebanon’s political and religious spectrum a wake up call and timely reminder that sectarian violence comes at a dangerous cost. 

As the country plunges ever-deeper into the economic abyss, political control and stability become increasingly fragile. It remains to be seen if some actors in Lebanon’s fractious political scene will use that weakness to grab power, by any means, regardless of the cost. 

Read also: Fueled by Sectarian Clashes, Protests Reignite in Lebanon

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