GP Insights

GP Insights # 236, 27 January 2020

Lebanon: A new government but crisis is worsening
Lakshmi V Menon

In the news
Post hundred days of fury and the ‘Week of Rage’, on 22 January 2020 Lebanon announced the formation of a new government. A third smaller than under former Prime Minister Saad Hariri, it is led by non-partisan Prime Minister Hassan Diab and new entrants into Lebanese polity’s upper echelons. With six women in the cabinet of 20 in defense (first ever Arab female defense minister), labour, youth and sports, justice, information and displaced profiles, it is Lebanon’s highest female representation in the Cabinet. 

Diab’s government faces rampant corruption and economic collapse. Despite Diab hailing the new government as the protestors’ “victory”, riots persisted demanding a technocrat-led cabinet and early elections; injuring scores in the clashes with security forces. Demonstrations soon spread from central Beirut to the outskirts.

Issues at large
First, Lebanon’s economy is in a pitiable state with a public debt of US$ 74.5 billion (140% of GDP) as of 2018 (US Ministry of Finance) and a gross external debt of US$ 39.3 billion as of 2017 (CIA Factbook). 

Second, mired in a worsening economic crisis since 2005, Lebanon is now facing irregular and informal capital controls and an austere liquidity crisis across the country’s banking sectors; disproportionately affecting small depositors. The population suffers from soaring food prices coupled with layoffs, salary cuts and interrupted fuel supplies. This has led to protestors targeting financial institutions than government infrastructure. The anti-corruption protests kicked off on 17 October 2019.

Third, Hezbollah, before backing Diab, lobbied for Hariri’s return and a national unity government under him with a strong representation of a Hezbollah coalition – a shield from US sanctions and re-enforcement of political power for Hezbollah.

Fourth, the new government’s formation came after the ‘Week of Rage’ during which demonstrators announced that they will resort to violent means; thus, vandalizing banks, top-end shops and attacking security forces with Molotov cocktails, stones and fireworks. Following the formation of the freshly minted government, rage has peaked.

In perspective
First, Diab’s government, divorced from reality, is too little and too late to fix Lebanon’s problems. The swelling debt will cause the impending payment default – a first for Lebanon.

Second, the new cabinet deal is a result of a contract with Iranian-backed Hezbollah, a key parliamentary bloc, and allies like the Free Patriotic Movement. Saudi Arabia, Hariri’s party and those aligned to the West haven’t had a say. The Hezbollah aligned “one colour” government, which lacks domestic trust, support and legitimacy will be unsuccessful in gaining international credibility. The US, having recognized Hezbollah as a terror group may dismiss this Cabinet as their extension; making Lebanon a scapegoat of the ongoing Iran-US proxy war.

Third, while many, including pro-Hezbollah Al-Akhbar newspaper, feel the arm-twisting by dominant political parties will persist, others prefer this to the political vacuum and resulting economic freefall. This may cause internal rifts among the protestors.

Lebanon is entering the abyss where the dual economic and political crisis will deepen and protests will escalate. The apocalyptic scenes will not leave the people’s collective memory. It may be as skirmishes, but Lebanon will see a prolonged conflict. 

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