Lebanon forms new government in effort to slow nation’s collapse

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BEIRUT, Lebanon, Sept. 10 (UPI) — Prime Minister Najib Mikati, a Lebanese politician and wealthy businessman, succeeded Friday in forming a new government, ending more than a year of stalemate that accelerated the collapse of the crisis-ridden country and further plunged the population into poverty.

The 24-member Cabinet was expected to pave the way for long-awaited negotiations with the International Monetary Fund to slow the collapse and agree on a plan to start rescuing the country.

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The new government will also have the task of preparing for next year’s general elections that could bring new faces to the parliament and loosen the grip of the traditional political parties largely blamed for widespread corruption and Lebanon’s unprecedented economic deterioration.

The new Cabinet, which was announced from the Presidential Palace after Mikati and President Michel Aoun signed a decree in the presence of House Speaker Nabih Berri, was apparently formed over a sudden, yet unclear, compromise among the political leaders, coupled with intense pressure exerted mainly by the United States and France.

What is clear is that the leaders and the powerful Iran-backed Hezbollah hold onto their share in government by naming the ministers as they have done for years.

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But some proved to be experts in their field — Youssef Khalil, a senior central bank official, who was appointed finance minister; Abdallah Bou Habib, Lebanon’s former ambassador in Washington, as foreign minister; and Dr. Firas Abiad, director of the government-run Rafik Hariri University hospital in Beirut, who was praised for leading the fight against COVID-19, as health minister.

Najla Riachi, the only woman in the Cabinet, was appointed minister of administrative development.

Mikati promised to spare no effort to “at least prevent the collapse” and to “knock on every door,” naming international organizations and Arab countries, to secure the minimum needed for the population and to “restore Lebanon’s prosperity.”

“Everyone knows that the situation is very hard…but solving [the crisis] is not impossible if we, Lebanese, stand in solidarity,” he told reporters, emotionally describing how a mother is forced to reduce milk intake for her child, or a son asks his father whether he would be able to go to school.

Mikati said he has a plan that the Cabinet will implement as soon as possible to save the country, but called on the people to “tighten the belts” because there are no reserves left or financial assistance to continue subsidizing essential items.

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Lebanon has been facing a deep, compounded crisis since October 2019 that resulted in soaring poverty and unemployment, with the Lebanese pound losing 90 percent of its value and most of its sectors collapsing one after the other.

Severe fuel shortages have recently accentuated the economic crisis and deepened the suffering of an exhausted population.

“The country is almost collapsing at all levels: financial, institutional, judicial and social…and soon on the security level,” Nicolas Chikhani, an economic and banking expert, told UPI. “The country is in so bad a shape that you need top experts that know the problems and implement solutions immediately to save the country.”

Chikhani said the new government has “a unique window of opportunity to do the right thing for once,” citing these five actions:

  • Agreeing on a monetary policy and stabilizing the devaluation of the Lebanese pound
  • Signing an agreement with the IMF, which will give​ the needed cash flow for the current and next year and restructuring the banking sector, as well as the internal and external debt of the country to reduce the debt over GDP ratio
  • Immediately creating a social net to address poverty and avoid security problems
  • Executing the forensic audit to investigate what led to the collapse of the Lebanese economy ​to be able to set the right solution and address the problem
  • Organizing fair and transparent general elections.

“The IMF will help with the restructuring of the external debts, imposing reforms of the public institutions…and reducing the public deficits, estimated at $3 billion to $5 billion per year over the past 20 years,” he said.

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While the IMF will bring back “external trust and investment,” restructuring the banking sector will restore “internal trust” and persuade Lebanese to release “fresh money” they are keeping at homes — estimated at some $10 billion — and reinject it into the market.

“The $10 billion in fresh dollars is huge for a country like Lebanon and would help with fast-speed recovery because today recovery is estimated for 10 years…Reinjecting this fresh money in the banking sector to refinance the economy can fast-track the economy for sure,” Chikhani said.

However, the new government needs to act quickly — within three to six months — to implement a plan based on the five points that can solve 60% to 70% of Lebanon’s economic problems, he said. But he warned if “hyperinflation settles in the country, like Venezuela, no economic plan will work.”

Lebanon’s dramatic deterioration has been a source of concern to the international community, which has been pressuring Lebanese leaders into forming a Cabinet as a precondition to release much-needed funds and other assistance.

“There have been [outside] pressures all the time, but I think there was a kind of an internal agreement” among the Lebanese leaders, Rosana Bou Monsef, a political analyst and columnist at the leading An Nahar newspaper, told UPI.

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Bou Monsef said the situation “is so dangerous for everybody in Lebanon…even for Hezbollah,” while the “foreign powers want a government at any price” for a transitory period of six to eight months to start the negotiations with the IMF, to halt the collapse and prepare for the upcoming elections.

At a time when Lebanon is set to mark the second year of the uprising that broke out on October 17, 2019 to bring down the corrupt ruling elite, the “political class has reimposed itself…and scored an important victory.”

The leaders could plunge again into their eternal disputes and foil fresh attempts to rescue the country.

Bou Monsef said Aoun and his son-in-law Gebran Bassil, who heads the Christian Free Patriotic Movement, might have “obtained a masked blocking third” to control the government, and “this could emerge and become clear when and if they face sensitive issues.”