Lebanon’s Economic and Political Crisis – Status Report

ATM on fire from a protest

In October 2019, a wave of demonstrations swept Lebanon in response to the government’s failure to find solutions to the country’s economic crisis. Due to the struggle against the coronavirus pandemic, the protests ceased for a while, returning later due to the dire economic situation and subsequently to the explosion in the port of Beirut on August 4, 2020. Since then, the country’s economic crisis has worsened. On June 1, the World Bank warned of a catastrophe that is approaching in huge steps due to the effects of the severe economic crisis in Lebanon. Between January 2020 and April 2021, there was a 350% increase in the prices of basic goods, especially oils, meat, sugar, fruits, and vegetables.

A report published by the World Bank titled: “Lebanon Sinking (To the Top 3)”, stating that there is no apparent end to the crisis in Lebanon, which may be one of the most difficult financial collapses the world has seen in the last 200 years. The report added that more than half of Lebanon’s population may have already been driven below the poverty line. The World Bank accused the Lebanese leadership of inaction stemming from months of disputes and quarrels between political factions that prevented the formation of a government that could have implemented economic reforms and saved Lebanon from collapse. In absence of a political solution that will save the country from the economic crisis in the near future, it is expected that the crisis will only continue and worsen in 2021.

Lebanese Interim Prime Minister, Hassan Diab even stated in a televised speech broadcast on June 2 that Lebanon was on the verge of a general collapse. Diab stressed the need to form a government to complete negotiations with the International Monetary Fund in order to rescue Lebanon from the country’s severe economic crisis. He also called upon politicians to make concessions to stop the expected deterioration in Lebanon and to emerge from the political stalemate.

The Lebanese Lira rate is further evidence of the heavy crisis in Lebanon, and in early June reached 15,000 Lira to one U.S. dollar. Moreover, the suspension of Lebanon’s funding to the special tribunal and the cancellation of Salim Ayash’s trial, who was accused of assassinating Prime Minister Rafik Hariri, shows how the economic collapse is slowly destroying Lebanon’s institutions, bringing the Lebanese state into a situation that it cannot fulfill its obligations.

At the same time, the demonstrations have resumed throughout Lebanon in recent months, but on a smaller scale than those that took place in 2019 and March 2021. Demonstrators are demanding the immediate establishment of a government that will extract the country out of the economic crisis. At a demonstration in early April in Beirut, the demonstrators blamed the current regime for the collapse of the country’s economy. The demonstration was accompanied by calls on social media to take to the streets under the banner “Saturday of rage”. That same month, demonstrators gathered in front of the Foreign Ministry headquarters in Beirut to protest against several issues. Among these, was the issue of Iranian interference in Lebanese sovereignty and in this context called for the dismissal of the Iranian ambassador from the country, appealing for the protection of Lebanon’s land and sea borders. The demonstrators described themselves as representing the civil and people’s movement created by the wave of demonstrations in October 2019, and also called for the adoption of international intervention, as suggested by Maronite Patriarch al-Rai in March 2021, in order to solve Lebanon’s political and economic crises by an international committee. The Maronite Patriarch, who was strongly condemned by Hezbollah, causing outrage among Hezbollah sympathizers, said, that peace is better than war, and that he is in favor of peace with Israel if the latter fulfills certain conditions, but in Lebanon, it is not the state that decides, it’s Hezbollah that makes the decisions, becoming the stumbling block to any progress.

The last major demonstration of rage took place this month, on June 3rd, which included the blocking of roads and starting of fires in the streets, this following the Bank of Lebanon’s decision to cancel the decision to allow account holders to withdraw dollars at a rate of 3900 Lebanese Lira per dollar.

June 3rd protests

Following the demonstrator’s pressure, a solution was agreed upon that would still allow dollars to be withdrawn at the aforementioned currency rate. A few days later, on June 6, protesters tried to break into the Ministry of Economy building in central Beirut, only to be dispersed by the Lebanese Riot Police Unit.

Despite one of the worst crises Lebanon has seen in its history, Lebanon has been unable to form a government for many months. This is due to a dispute over the division of quotas between the Lebanese parties and president Michel Aoun’s insistence on appointing all Christian ministers in the government without allowing the designated prime minister, Saad Hariri, to do so. Attempts to bring President Aoun and Prime Minister Hariri together have been unsuccessful at this stage, while relations between the two sides are only deteriorating against the backdrop of mutual accusations and insults.

As of now, the fuel in the reservoirs is running out, some of the gas stations are shut down, there is a power allocation for several hours a day, there is a shortage of subsidized food products and there is a shortage of medicines.

It is difficult to predict what will happen in Lebanon. It is clear that the “State of Hezbollah” operates independently on all levels of the Lebanese state, which is one of the main factors in the difficult political and economic situation the Lebanese state is in. Not only does Hezbollah act independently, but it also acts at the expense of Lebanon’s resources, exploiting them to its advantage. Among other things, utilization strengthens the narrative. As Nasrallah noted in his last speech, “There is no problem in bringing oil from Iran in a short time …”

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Picture of Dafna Messing

Dafna Messing

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