The living conditions in Lebanon deteriorated during the past two years due to the collapse of the value of the national currency, resulting in the largest crisis the country has witnessed since its independence in 1943. The decline in government support for the prices of basic commodities such as fuel, wheat and medicine coupled with the political and sectarian tension led to phenomena that the country has not witnessed in its history, such as clashes with firearms. During the rush to get subsidized fuel, and cancer patients took to the street to ask for medicines that traders had hidden in their warehouses, to sell them later at higher prices.
According to the figures of the trade unions, a mass emigration has occurred in a number of sectors, most notably the medical and nursing sectors, and its indicators can be inferred from the queues that are organized since the night hours in front of the public security centers in order to obtain passports that allow leaving the country.
The Corona pandemic, the forced closures that accompanied it, and the disaster of the Beirut Port explosion on August 4, 2020, exacerbated the crisis in its economic, political and living manifestations.
This coverage with numbers, data, analyzes and information presents the aspects of the Lebanese crisis that continues in 2021, its major indicators, and the future of the country that preceded Singapore in growth rates and living indicators in the 1960s.
multidimensional crisis
The current crisis that Lebanon is witnessing is the most serious in its contemporary history. The deterioration of economic indicators and its dangerous social repercussions were not known to the Land of the Cedars even during the civil war that lasted about 15 years.
With the difficult birth of Najib Mikati's government on September 10, 13 months after the resignation of Hassan Diab's government, the difficulty of finding solutions to stop the deterioration in a first stage and restore balance in a second stage emerges.
Indicators of collapse The
World Bank ranked what Lebanon is currently experiencing as the 3 worst crises in the world after Chile and Spain, while Chile took 16 years to recover from its collapse in 1926, and Spain during its civil war (1936-1939), which took 26 years to recover, the Bank estimated that Lebanon had It takes 12 to 19 years to recover, and the following are illustrated samples that show some manifestations of the deterioration of living conditions and services.
Muhammad Hassan Al-Saleh, who resides in Sidon in the south, obtained 4 cartons of milk for his two infant sons through a friend who resides in Kesrouan (Al-Jazeera)
On the municipal roundabout in Sidon, begging to pay the rent of the house (Al-Jazeera)
Shops selling electrical appliances offer their customers lamps that run on diesel (Al-Jazeera)
Two children selling used shoes to support their family (Getty Images)
A rush to buy bread as its prices continue to rise (Reuters)
Protests and roadblocks are a daily practice in the streets of Lebanese cities (Reuters)
street protests
Since the "garbage protests" in 2015, the Lebanese street, which was anticipating the depth of the crisis in the country and its consequences, has not calmed down.
It was the WhatsApp protests in October 2019 against the imposition of a tax on WhatsApp communications that ignited the street and prompted the resignation of Saad Hariri's government two weeks later.
Since then, the Lebanese street has hardly calmed down until it is turbulent again, although the motives for demonstrating and blocking roads vary and differ from one demonstration to another, and from one region to another.
And last June witnessed the last of these waves and the widest in scope, as they were distributed over the geography of Lebanon from north to south, passing through the capital.
The roots of the crisis
World Bank experts link the economic, political, and living crisis in Lebanon to government waste and corruption over the past 30 years.
In its report issued in June 2021, the World Bank expressed its pessimism about the possibility of a clear sign of transformation ahead of Lebanon on the horizon, given what it described as “disastrous and deliberate policy inaction, fueled by waste and government corruption for decades.”
Two well-known Lebanese economists, Tawfiq Kaspar and Kamal Deeb, have exposed the policies that have strangled the Lebanese economy since the end of the civil war in 1989 in books published in 2005 and 2020, the first of which is Kaspar's book issued in 2005, which dealt with the legacy of the Rafic Hariri governments between 1993 and 2002, and here Most notably:
- "The balance of payments remained positive every year from 1951-1982, except for a small deficit during 1967, and the government was almost without debt in 1975 (the year of the outbreak of the civil war), and then the government's debt remained at moderate levels until the beginning of the nineties of the twentieth century."
p 88
- “The details of the reconstruction plan drawn up by the government (the first Hariri government at the end of 1992) were published in an official document called “Horizon 2000 for Reconstruction and Development.” Basically, the plan was a program of spending an amount of 14.3 billion dollars on various regions and sectors, during ten years (1993-2002), however, the plan was soon folded after it was overtaken by economic developments, and it showed its unrealism" p. 259
– “The government’s entire economic strategy was based on ensuring the stability of the exchange rate of the lira and ambitious spending. These two policies were implemented, but the result was significantly different from expectations, as the period since 1992 was characterized by two prominent phenomena: low growth rates and a significant increase in public debt” p. 261
- “Starting in 1997, the talk that was previously circulating about reconstruction began to show concern about the high levels of the fiscal deficit and the public debt. The authorities did not act until 2002 regarding the danger posed by the mounting public debt, and the accompanying great pressures on the Lebanese pound. I then announced an ambitious economic reform program based mainly on projects to privatize some public utilities."
pp. 264-265
Assuming that all investment expenditures went to reconstruction, it turns out that only a small part, about 14% of the total expenditures, was allocated to the reconstruction process. Just as in the past and before 1975, the share of regions outside Beirut and the center of the country was small, while the cost of benefits On public debt, it amounted to 39% of total expenditures, which is equivalent to 15% of GDP.In general, successive governments since 1993 have spent more than two-thirds of the amount, or 26% of GDP, on public debt interests, salaries and wages. Asking the following question: Is it possible to estimate the amount of waste in these expenditures?
pp. 266-267.
Kamal Deeb dealt with the era of Rafik Hariri between 1992 and 2005, and here is the most prominent of what he mentioned in his book, which was published in 2020, and was the last episode of 3 books on Lebanon's economy:
- With the arrival of Rafik Hariri to the presidency on October 31, 1992, the era of the quota state began, when he was assigned to “form an economic rescue government” that formed an opportunity to share jobs and spoils, within the framework of what was known as “the troika of government” (Elias Hrawi, Nabih Berri). Rafik Hariri).
- “People in power employed their followers and family members by the thousands in state institutions and public administration” (…), and “corruption invaded public administrations by means of cheating and passing deals and approvals against the law to benefit the footnotes” (pp. 149-150).
The pillars of the economy in the quota state were based on 3 foundations, first: holding the national currency by permanently linking it to the US dollar, which required raising the interests and the cost of state financing, and second: cutting off the commercial center (Beirut) and making it a monopoly on those, and third: sharing ministries services and security and military agencies” (p. 165).
- In May 1993, Riad Salameh was appointed governor of the Central Bank of Lebanon as “the main pillar in the implementation of Hariri’s financial policy” (p. 180), and Hariri’s management of public debt was summed up by allowing the Bank of Lebanon to gradually raise the value of the pound (it had reached 3,000 pounds against a dollar). ) and fixing it on the US dollar (1507 Lebanese pounds)" (p. 187).
“The policy of stabilizing the currency towards the dollar led to an extraordinary growth in public debt, and swallowed up bank deposits liberated in pounds” (p. 188).
- “The Hariri government has excessively borrowed due to its persistent failure to curb the budget deficit” (…), and the proceeds of the debt were divided into two parts: paying the bills resulting from the bonds, and then paying the division of the bonds when they are due at a future date that extends to God willing” (p. 180).
- “The result of 6 years of Hariri’s government and its amazing dynamism was the accumulation of a huge public debt that would be an unbearable burden on the shoulders of generations of Lebanese, rolling like a snowball from two billion dollars on the eve of the Hariri government’s birth in 1992 to 15 billion dollars in 1998, which equaled the Lebanese national product ( 100%), then to 90 billion in 20 years” (pp. 192-193).
The public financial crisis became a reality on the ground when Hariri returned to the presidency in 2000. “The cause of the financial crisis was not only the growth of public debt and the payment of interests, but other reasons: Hariri and the lords of power shared the benefits of the rentier economy, and the leaders squandered the resources of the service ministries Which they control to use it for political clientelism away from development goals, and the expenditures and benefits of the security services and military and security leaders, which were growing year after year” (pp. 282-283).
Growth in a cycle of crises
Due to the fragility of the Lebanese economy, which is based mainly on the services sector, tourism, the flow of deposits and external capital, and is dominated by the consumption pattern, successive political crises, wars, internal divisions and regional disputes have played a major role in its growth up and down in the past decades, and in the recent period, led The state of political paralysis has led to the collapse of the economy and an unprecedented deterioration in living conditions.
The civil war was a pivotal moment between two phases, during which the Lebanese “Al-Buraq” model collapsed, with its economic and social aspects. Before that, Lebanon was known as the “Pearl of the Orient” with remarkable economic and living indicators, accompanied by an unprecedented artistic and cultural movement, and witnessed the post-Taif Agreement (1990) phase. Political stability and economic recovery, and later the situation continued to fluctuate according to the severity of the internal and regional crises.
Riad Salameh.. the chronic governor of the bank
since the outbreak of the financial crisis in 2019 It seemed as if the governor of the Central Bank and the godfather of Lebanon’s financial policies since 1993 was holding its hands, despite the judicial suspicions that were raised against him in Switzerland and France and translated an interrogation of him by the discriminatory attorney general in Lebanon.
The mission of Salama and his bank - according to the Lebanese Monetary and Credit Law - is summarized as “the safety of cash, economic stability, and the soundness of the banking situation”, but his position was established since the beginning of the collapse of the value of the lira (the local currency) at the end of 2019 at the intersection of the fires of 3 sides: the government of Hassan Diab and its sponsors ( Hezbollah, the Amal Movement, the Free Patriotic Movement), the banks and the angry street.
The three parties met to load him with the “financial engineering” button that he devised, which led to the replacement of state imports that had been lacking due to the failure of its rentier policies during the past 30 years with citizens’ deposits and savings, and Salama’s position was shaken in June 2020 and became closer to dismissal without the accounts of the political class The complex was to agree on a successor, and the leader of Amal and Parliament Speaker Nabih Berri intervened on his side.
In 2004 (during the Paris Conference 2), Salama was referred to as a good man because of his investment in gold, after Elias Sarkis had initiated its accumulation when he was governor of the Central Bank.
Salameh built a large stockpile of official foreign currency reserves.
But after 17 years, it turned from a symbol of monetary stability to a symbol of financial engineering that benefited businessmen and the political class.
At the end of April 2020, Salameh responded to his critics - in a press conference - by correcting all previous governments, and said that the Banque du Liban funded the state, but it was not from the disbursement of funds, calling on the constitutional institutions to disclose the mechanism and how to disburse those funds.
His lack of hesitation in July 2021 to lift fuel subsidies (the treasury costs 6 billion dollars annually) without waiting for the approval of the financing card indicates the strength of his position towards the ruling political class, whose symbols he said know about the unpopular decision in advance without going to support it in public.
But Salameh’s legal position has not been the same since January 2020, when on this date the Federal Prosecutor in Switzerland raised suspicions about his possible involvement in “committing dangerous money laundering operations, in connection with a possible embezzlement of funds on the account of the Banque du Liban”, which opened the door Before the Public Prosecutor, Judge Jean Tannous, to question Salameh on July 5, 2021, over a period of 3 hours and 15 minutes.
In France - of which Salama holds her nationality - two complaints about Salameh's fortune appeared in June 2021, including criminal conspiracy and money laundering, and the French Public Prosecution requested its financial police to conduct its investigations based on these accusations.
There is an international and regional dimension to the Lebanese economic and political crisis, which is demonstrated by the positions of the influential countries in Lebanon, particularly the United States and France.
Government disruption and political crisis
future scenarios
What are the consequences of the Lebanese state’s announcement in March 2020 that former Prime Minister Hassan Diab declared bankruptcy?
What will result from the spread of chaos, disorder and poverty?
Will the upcoming elections bring a new political team?
These are examples of questions asked by Al Jazeera Net to 3 Lebanese specialists: Antoine Farah, Maysoon Hamza and Hussein Hamza.
Staff
Editors: Muhammad Al-Ali and Zuhair Hamdani
Designs and infographics: multimedia section