Today is the 10 month anniversary of the explosion of the Port of Beirut, the third largest non-nuclear explosion in the world, and every day brings more shocks to a people already bewildered by a series of terrible events which have torn through their lives, taken their savings, their jobs and their dreams.
The problem lies where? It lies in the ineptitude of the present leadership to remedy the situation. Instead, they have systematically missed all the avenues for possible recovery and have made bad choice after bad choice.
Their actions are full of incongruities. There is no consistent strategy to save the nation. There are no tough precise measures being taken to enforce solutions. Everything is random and designed to delay the inevitable instead of tackling it straight on.
To this day in the financial sector, the audit company hired to look into the affairs of the Central Bank (and consequently the Government) is still complaining that they have not been given full access to the information that they are demanding. As a matter of fact, nobody knows the exact amount of the foreign currency remaining in the coffers of the Central Bank’s reserves which they have used up to subsidize basic goods such as fuel, medicine and wheat.
This palliative strategy to delay the inevitable has burned through Lebanon’s wealth and is now threatening to impact the deposits in the Mandatory Fund which are the last remaining dollars owned by the depositors.
As for the Lebanese currency, the policy there are 5 rates to the Lira in the market: the official $1570, the not-so official $3,900, the $6400 the Government used to value the exchange rate of the $240 million loan from the World Bank which is to be distributed in Lebanese Pounds to the poorest families, the $12,000 of the so called currency platform, and at the time of this paper, the $15,000 of the black market.
They have left the population without a national unified policy to facilitate the buying and selling of goods and have allowed the black market to define the market rates. This has made the platform that the Central Bank erected a redundant mockery and it is stillborn even before it starts. As a result, merchants do not how to price goods and so they prefer not to sell them and to shut down their business because they cannot keep up with the devaluation.
Instead of having a concise monetary strategy, the situation is a fiasco with a seesawing of random policies. The latest example of this was the directive issued from the Shura Council which hinted that lenders can pay their customers at the official rate of LL1,500. This triggered street protests in a number of cities as depositors saw their savings evaporate. The Government rapidly reneged on this move and allowed the banks to continue to pay their customers with foreign currency accounts at the rate of LL3,900 to dollar, but in the meantime it caused immense confusion, frustration and insecurity as people continue to struggle to salvage what remains of their deposits.
Another example of the failure of leadership is their inability to bring anything to fruition. A year and a half ago, at the beginning of the economic collapse the then functioning Government, aided by the World Bank, proposed a roadmap for the containment and restitution of the financial crisis. Today these proposals have been abandoned having been torpedoed by the default on the debt payment which the Government chose to enact, basically placing the country into potential receivership.
The lack of purposefulness by Parliament to enact the Capital Control Law is obvious in that it is still being debated by the Finance Committee in Parliament after nearly two years of unlawful and outlandish restrictions imposed by the banking sector on the depositors who have been denied any recourse to protect themselves, when none of the perpetrators, Banks and Central Bank, have been held to account or punished. On the contrary, they have been allowed to do whatever they want.
A Capital Control Law should have been voted on and imposed from the outset to protect the citizens and ultimately the banks, but it would seem that delaying its authorship provided the oligarchy enough time to transfer the remaining of their funds outside the country without being accused of breaking any law.
The Capital Control Law which they are proposing does not offer anything new, being that the de facto haircut and the blocking of funds have been in effect all this time and on top of this, the rules for the transfer of funds it is outlining is useless because the banks are claiming that they will not be able to provide the foreign currency required to effect any such transactions.
As a matter of fact, they are saying that they cannot even match the parity of fresh money required from the Governor of the Central Bank for the re-payment of $25,000, in 3 year instalments of $400 per month, to the poorest families with less than $50,000 in their accounts.
Needless to say that this latest random resolution imposed by the Governor’s does not solve anything. It is an attempt by him to sweep under the rug the problem of paying back funds by way of appeasing small depositors and getting them off his back, but what about the big depositors with the millions of Lollars sitting in the moribund Lebanese banks? Who is going to pay them back? So far there is no strategy nor the means to resolve this problem.
The matter of a bail-in has also been taken off the table because it will mean that Syrian depositors (who have more than 20 billion dollars of savings stuck in the Lebanese banking system) and the majority Shia and African depositors, including African leaders, (who have about 30 billion Dollars of deposits also blocked), will be the main beneficiary of such bail-in and will end up owning the Lebanese banking system. So what next? Nobody knows.
This inertia, procrastination and lack of bold leadership is just deepening the financial crisis and making the loss of faith in the Lebanese Banking system endemic.
As for managing the societal problems caused by poverty, foods shortages and unemployment the incompetence shown to-date to resolve these matters is reckless and causing further endangerment.
The Finance Card for the poor which has been promised for months has not yet seen the light of day because they don’t know where to source the money to make these payments having used up all the foreign currency reserves.
In addition, the $240 contribution by the World Bank which was supposed to be given to the poorest families months ago is still stuck in the quagmire of logistics and deliberations in Parliament, as they debate whether to disburse it in Pounds or Dollars and what commission should be retained by The Central Bank, notwithstanding the fact that, as time goes by, whatever they disburse will have inadequate purchasing power because of the hyperinflation in Lebanon which is nearing 150%.
Let us move on from the ineptitude to resolve the financial crisis, to the inertia and ill will in the political sector. Lebanon has lacked a full government, (not a caretaker one) since August last year (10 months ago today) when the Government resigned after the massive blast at the Port of Beirut.
The Political paralysis we are witnessing is complicating the economic meltdown, as fractious political leaders refuse to agree on a new cabinet capable of implementing reforms required to unlock foreign aid.
In the meantime, the arguments between the factions have had repercussions on every state apparatus in the country and Lebanon is becoming a failed nation on every level and in every sector.
This complete breakdown of the state apparatuses has affected the Constitutional Council where three judges having passed away is now left without the ability to form a quorum because the new nominations are held up for political reasons. The Supreme Judicial Council is also the victim of short sighted politics and has been caught in the middle of a tug-of-war since March 2020, when the President refused to sign the decree to renew its mandate and shelved the nominations to replace 7 of its 10 members whose terms expired at the end of May.
But really the worst travesty by far, which is causing the most damage to the nation, is the inability of a few of the contentious leaders to agree on a Government that can bring about the rescue packages need to remedy the present critical situation.
They have locked the debate in petty arguments and have completely lost sight of the big picture. They are using the old paradigms to form a government based on a format that is completely defunct and useless because of the conditions imposed by the unprecedented economic crisis.
They are pathetically debating who names two Christian ministers, at a time when the nation cannot offer among many other services, gasoline, imports, work, medicines, and healthcare to its citizens.
They are selling the cart before the horse as they endlessly argue for the control of a Government that has no longer a chance of working on a consensual basis after the blatant and scything accusations that each party has publicly unleashed against the other.
They just delay and delay because they personally want to stay in the game. But it is not a game anymore. It is human lives we are talking about. They have created a macabre dance around the formation of the Government, whereby they trade blame and keep turning and turning, while remaining in place.
The truth is that they are only interested in pretending to be concerned about the issues when in reality, they are satisfied with the status quo on all sides as it confers on them a pseudo legitimacy that none of them deserve at this point.
They are criminal in that have lost and forfeited months of opportunities to put the country on the path to solutions. Lebanon has sunk too far to resolve its problems on its own. Everything that it does internally at this point is diminishing returns.
What these petty leaders don’t understand is that the only avenue remaining for the salvation of Lebanon is for them to put their narrow ambitions aside at any cost and to comply with the international demands to form or a Government that can really deliver reforms.
They have to accept that they must negotiate with the IMF and then comply with the implementation of the harsh solutions that the IMF will impose.
Let us not dream too much. Until now they appear to be cowards. None of them want to forfeit their popularity by implementing these draconian requirements, preferring as always to pretend that the situation will resolve itself. The bad news is, this time it will not, and their customary survival tactics of “delay and deny” is leading us all to perdition.
Only time will tell how bad the situation will becomes in Lebanon and provided that the International community continues to help the population through non-governmental aid that reaches them directly, and that they stand by the Lebanese people to demand that parliamentary elections be held on time, and provided that we have friendly nations who are willing to give us fuel from time to time, to delay the electricity and internet blackout, and provided that the diaspora keeps sending money to their families, maybe the Lebanese people can survive long enough to remove the obstacles to their salvation.
If not, then prepare for the worst and at that time there will be no recourse but to ask for the protection of the Lebanese people by invoking Articles 39, 40 and 41 of Chapter VII of the charter of United Nations’ Security Council which determines and makes recommendations to maintain or restore peace and security, and to prevent a worsening of an already dire and deadly situation.