Abu Dhabi, UAEThursday 20 February 2020

Lebanon needs a long-term plan for its economy

The country passed a budget for this year that fails to take into account its financial crisis

Lebanese Prime Minister Hassan Diab attends the 2020 discussion budget session at the parliament, in Beirut. AP
Lebanese Prime Minister Hassan Diab attends the 2020 discussion budget session at the parliament, in Beirut. AP

One week ago, the Lebanese saw the arrival of prime minister Hassan Diab in the Grand Serail. Yesterday, they witnessed his first day in action. Mr Diab oversaw the passing of a new Lebanese budget in a half-empty Parliament building surrounded by angry protesters.

The budget vote was boycotted by most western-leaning parties, such as Lebanese Forces and Kataib, as well as former and current members of government, except for Mr Diab. It was difficult to avoid attaching any symbolism to the image of Mr Diab, alone amid rows of empty seats. In his solitude, he was defending a budget that his own Cabinet did not draft, and that was championed most eagerly by Hezbollah and its allies – the very political extremists from whom Mr Diab’s appointment was meant to represent a departure.

Lebanon’s new budget was designed by its previous government – that of prime minister Saad Hariri, who resigned in October, just before the country was hit with the full force of a financial crisis that risks throwing the Lebanese pound into freefall. The currency has already lost half of its value on the black market. Meanwhile, banks have imposed draconian capital controls on foreign currency withdrawals in the absence of any official guidelines from the Central Bank. The budget passed yesterday fails to address any of those problems.

The original draft was dated and drawn up in haste just before Mr Hariri left office. It simply listed the total sums of money allocated to 30 ministries, 10 of which, in Mr Diab’s new cabinet, no longer exist. Mr Diab’s iteration is an adaptation containing unrealistic projections of revenue and expenditure, and no plan for the country’s economic crisis.

Mr Hariri’s own Future Movement was among the parties to vote against the budget their leader helped to draft. The MPs who did cast a vote had to summon a certain amount of determination to do so; the entrance to parliament was blocked for a time by protesters, who shouted that their representatives in parliament no longer serve the very people they are supposed to represent. MPs are seen by Lebanon’s cross-religious protest movement as the representatives of a sectarian political elite, breaking faith with the population and eroding the population’s faith in the pound.

Mr Diab and his Cabinet do not belong to any party. They were ushered into government by Hezbollah and its allies in an attempt to appease the protest movement. But this tokenistic move is only drawing further rage. Furthermore, a government that is truly hamstrung from breaking with Hezbollah’s paradigm has little chance of attracting the foreign financial assistance that Lebanon so desperately needs.

Mr Hariri’s own Future Movement was among the parties to vote against the budget their leader helped to draft

Mr Diab has vowed to tackle Lebanon’s woes head-on with a “national rescue” cabinet, and announced that his first diplomatic visit will be to some of Lebanon’s traditional donors and allies in the Gulf. The country’s finance minister is also set to meet with a senior official at the International Monetary Fund. But, as donors have long pointed out to successive Lebanese governments, securing funds requires serious initiatives to get the economy back on track. It also means that Mr Diab must gain the trust of international institutions and friendly countries that Lebanon has failed before. At the 2018 Cedre conference for economic development, international donors including France and Saudi Arabia pledged $11 billion to Lebanon, conditional on sweeping reforms. These reforms have yet to materialise.

Mr Diab and his Cabinet now have a chance to make things right for Lebanon. But passing a budget without a long-term vision for the country’s embattled economy, and little support in the street as well as in Parliament, is an underwhelming achievement and will not be sufficient enough to secure the economy. Lebanon’s new cabinet would do well to remember that currencies are not the only things that operate on the basis of popular faith. Governments do, too.

Updated: January 30, 2020 02:44 PM

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