BEIRUT: Troubled Lebanon teetered on the verge of a social explosion Tuesday as the pound sunk to a new record low on the black market, sparking angry street protests.
With the Cabinet formation process at a dead end and the top officials not talking to each other to resolve the crisis, the dollar rate fell to nearly 10,000 pounds for the first time, raising fears of further economic and financial deterioration if rival leaders do not act quickly to form a new government.
“The first step toward easing the economic crisis and halting the collapse of the pound begins with forming a new government to embark on essential reforms that will encourage the international community to come forward with its promised aid to Lebanon. Otherwise, the pound will continue its free-fall,” an economic expert told The Daily Star.
Hundreds of disgruntled residents in Beirut, the north and the Bekaa Valley took to the streets, blocking roads with burning tires to protest the deteriorating living conditions and the unchecked rise of the dollar, in the latest of popular demonstrations against the ruling political elite blamed for rampant corruption and mismanagement that led to the crippling economic crisis.
The pound traded at LL9,900 against the dollar on the black market as the country's ailing banks were buying the greenback to meet Central Bank liquidity requirements. Exchange dealers were buying the dollar for LL9,800 and selling it for LL10,000, from LL9,650-LL9,700 Monday. Most dealers, though, stopped selling dollars. The pound hit a record low of LL9,800 last July.
Fueling the economic and financial deterioration was the absence of meetings or even contacts between President Michel Aoun and Prime Minister-designate Saad Hariri to resolve their differences over the formation of a proposed 18-member Cabinet of nonpartisan specialists to deliver reforms. As the two leaders stood firm on their conflicting positions, this has dashed hopes for an imminent solution to the crisis, which has entered its seventh month.
The Cabinet impasse comes as Lebanon is wrestling with multiple crises, including an unprecedented an economic meltdown that has sent the pound crashing and losing more than 85 percent of its value since 2019, and subsequently put half of Lebanon’s 6 million population below the poverty line.
The Cabinet formation stalemate coincided with a new split caused by Maronite Patriarch Bechara al-Rai’s calls for declaring Lebanon’s “neutrality” and for a UN-sponsored international conference to resolve the country’s deepening political and economic crises, overriding opposition from Hezbollah and its allies and the top Shiite religious authority.
MPs from across the political divide warned of an imminent “social explosion” if a new government was not formed quickly to remedy situation by implementing a slew of economic and administrative reforms outlined in the French initiative designed to rescue Lebanon from its worst economic and financial crunch since the 1975-90 Civil War.
“The Central Statistics [office] [in Lebanon has indicated that inflation in 2020 exceeded 82 percent and will rise this year. The World Bank’s report showed that the Lebanese per capita income is the worst among 144 countries. The emigration of the Lebanese youth has increased threefold from 2016. The formation of a government is a supreme national responsibility. The people are moaning from need and impoverishment. Beware a social explosion,” MP Anwar Khalil, a member of Parliament Speaker Nabih Berri’s parliamentary bloc, wrote on his Twitter account.
MP Imad Wakkim from the Lebanese Forces’ parliamentary Strong Republic bloc echoed a similar view.
“The dollar hit the threshold of 10,000 pounds. The authority disagrees on the division of cheese and does not form a government. The authority does not want to implement any reforms so that it can benefit from the International Monetary Fund’s assistance,” Wakkim tweeted.
Accusing the ruling elite of rejecting Rai’s call for Lebanon’s neutrality and an international conference for the “sake of Iran’s eyes,” he added: “The solution is [through] a revolution to remove the authority from its roots and early parliamentary elections.”
MP Ziad Hawatt from the LF’s bloc said in a TV interview: “We are heading for an unprecedented economic and political explosion in Lebanon.”
MP Tony Frangieh from the Marada Movement tweeted: “The dollar nearly hit 10,000 pounds without any progress at the economic and government levels being made. Are some waiting for a social explosion, or chaos is required?”
Speaking to visitors at Baabda Palace Tuesday, Aoun said attempts were underway to form a government to negotiate with financial institutions for assistance.
“We are currently seeking to form a government in order to be able to negotiate with financial institutions which are ready for assistance, particularly since Lebanon is in dire need for this assistance,” Aoun said during a meeting with a delegation from the World Lebanese Cultural Union. He called on Lebanese expatriates to help Lebanon overcome the economic crisis by setting up institutions to create job opportunities for Lebanese youth in order to discourage them from emigrating due to the difficult living conditions.
Lebanon began talks with the IMF on a $10 billion bailout package in May 2020, but the negotiations have been stalled by a dispute between different interest groups representing Lebanese banks and the government over the size of losses in the Central Bank.
Aoun said the financial crisis has been exacerbated by the consequences of the 10-year-old war in Syria and the influx of around 1.8 million displaced Syrians into Lebanon, the closure of border crossings with Syria, severance of contacts with Arab countries, the coronavirus pandemic, and the massive Aug. 4 explosion that devastated Beirut Port, damaged half of the capital, killed more than 200 people, injured thousands, left 300,000 people homeless and caused billions of dollars in material damage.
Meanwhile, a Future parliamentary bloc delegation met Tuesday with Greek Orthodox Archbishop of Beirut Elias Audeh and Druze spiritual leader Naim Hassan as part of their calls on religious leaders to brief them on Hariri’s ongoing contacts to form a new government and the hurdles he was facing. On Hariri’s instructions, the bloc had already met with Rai and Grand Mufti Sheikh Abdel-Latif Derian.
“We visited Archbishop Elias Audeh and briefed him on the contacts and efforts made by the prime minister-designate in the formation of a mission government made up of nonpartisan specialists to address the suffocating crisis in Lebanon, halt the collapse, rebuild the devastation caused by the port explosion and implement the required reforms,” MP Nazeh Najem told reporters after the meeting with Audeh.
He said the delegation, headed by MP Bahia Hariri, also briefed Audeh on the outcome of Hariri’s tour of some countries and these countries’ readiness to help Lebanon as soon as a mission government was formed.
Hariri has in recent weeks held talks with the leaders of Turkey, Egypt, the United Arab Emirates, Qatar and France aimed at restoring Lebanon’s ties with Arab and friendly states.
Although the Future Movement has avoided supporting Rai’s calls for Lebanon’s “neutrality” and for an international conference, Najem said: “In this respect [Rai’s calls], we underline the good intentions and goals of his beatitude in his efforts to resolve the Lebanese crisis. We welcome any international efforts that help Lebanon find a solution to the crises from which it is suffering.”