The successive titles of the “Lebanese Economic Monitor” (LEM) reports by the World Bank since 2020 tell the whole story of the Lebanese economic depression, possibly one of top three most severe economic collapses worldwide since the 1850s.: “The Deliberate Depression” in 2020, “Lebanon is Sinking” in 2021, and “The Great Denial” in 2022. To recap on some figures in these reports: between 2019 and 2021, real GDP recorded a 58.1 percent contraction, the poverty rate reached 82% of the population, the Lebanese pound depreciated by around 219 percent in 2021, the inflation rate surged to 157% in April 2021, and more than 60 percent of the country’s young people are unemployed with the brain drain becoming the only alternative for a decent future.
Lebanon’s crisis is unique. Not because of its magnitude nor because of its multi-faceted financial economic and social nature. Stagflation cannot be attributed to “unplanned” circumstances. The national debt stemming from accrued budget deficits did not originate from increased expenditures that could have occurred because of an external shock on supply due to unforeseen events such as wars, terrorist acts, social unrest, natural disasters, pandemics, or oil shocks. What is unique in Lebanon is that budget deficits were due to all such events deliberately perpetrated internally by Hezbollah, which the U.S. considers a terrorist organization supported financially, politically and militarily by Iran.
The assassination of the Lebanese Prime Minister Rafic Hariri by a mid-level operative in Hezbollah in 2005 according to the International Tribunal verdict (followed by the assassination of sovereign public figures), the 2006 war with Israel which started with the Hezbollah cross-border raid, the 7th of May 2008 military internal conflict leading to the occupation of the capital by Hezbollah, the Iranian-led involvement of Hezbollah in Syria and Yemen, more recently the repeated suspensions of the investigation into the Beirut port explosion by Hezbollah and allies, and this is to name only a few “deliberate internal shocks”, resulted in a “zombie-like state of the economy incurring unnecessary social pain” (LEM, Fall 2021).
In addition, budget deficits soared because of corruption and mismanagement. Trafficking subsidized goods to Syria including fuel, tax evasion, smuggling drugs to the Arab countries, which is jeopardizing trade and foreign direct investment leaving us without capital inflows of foreign exchange resulting in balance of payments deficits and the depreciation of the LBP, led to sharp decreases of government revenues recording an estimate of 6.6 percent of GDP in 2021, marking it as the 3rd lowest ratio globally. Furthermore, the discretionary spending policies of successive governments dominated by Hezbollah aggravated the state of public finances. The public employment rate in Lebanon is the highest in the world. Before the last parliamentary elections in 2018, the recruitment of approximately 5000 new employees in the public sector did not conform to the employment laws. They were employed as favors to secure votes for Hezbollah and its accomplices during the elections. The proportion of public servants’ wages and benefits in total expenditures is the highest (36%) and increased even more since the government decision to index wages and benefits to inflation in 2018, again before the elections. And the price-wage spiral won’t end!
Political considerations have also impeded the appointment an independent regulatory body for the administration of transparent procurement processes and the control of infrastructure contracts’ execution. This has discouraged private investments, and all hopes to stop the financial bleeding caused especially by the energy sector were lost. Expenditures on electricity alone have accumulated US$40 billion of debt or around 43% of government debt and successive technical solutions to remedy supply shortages for decades were never implemented because of corruption and opportunism. Poor governance and corruption destroyed many sectors as well, such as health and education, and contributed to environmental threats, including air and water pollution, risks associated with climate change, and the impact of the deadly explosion of Beirut port.
The Iranian plan to dominate Lebanon using Hezbollah military and political resources worked. The deliberate impoverishment of the Lebanese persists constituting another means to bring them to their knees. Therefore, none of the classical economic recovery plans would reverse the “deliberate depression”, nor could the Lebanese count on the ruling public authorities currently negotiating with the IMF to reverse a disastrous situation. In fact, while taking the IMF requirements as a pretext to make the Lebanese suffer the consequences of their deliberate failure to implement reforms, the negotiating team insults our intelligence once again with their plans for redistributing losses. Losses are to be redistributed between the government and banks. Citizens who have been suffering since 3 years from the informal adoption of severe discriminatory illegal capital controls in banks cannot expect a formal capital control to stop their misery. The depreciation of the Lebanese Pound and the multiple exchange rate system will persist as long as borders’ regulations are consistently violated. The proposed lirafication and haircuts on dollar deposits is netting out bank positions between assets and liabilities harming especially the smaller depositors and SMEs. In the proposed budget and because the IMF requires revenue increases for the sustainability of the debt, our negotiating team sees it fit to impose higher taxes and tariffs ignoring that when the tax bases (whether revenues or consumption) decrease it is impossible for fiscal revenues to increase despite higher tax rates. The big question is: how are these measures redistributing losses? What losses is the government bearing? How are the banks, who have invested most of their reserves in treasury bonds, paying for their greed? But more importantly: does the IMF consider any of these measures to be compatible with a sustained growth? We certainly hope not!!!!
Classical economic recovery plans won’t work. Institutions are captured by the ruling politicians under the Iranian command and control. Although the Lebanese people are thankful for all humanitarian aid but we would like to point out that we are not to be treated like refugees in our own country. We don’t need “sugar and spice” because nothing is or will be nice! What we need is for the IMF and other international institutions to stop looking into their own interests at our expense but rather deliver on their engagement to support freedom of democracy, human rights, ethics and transparency that probably should be taught to the occupiers! This would help us more than any loan or deal they might offer. We Lebanese are not beggars!
I must apologize for any crime perpetrated by the occupiers that I omitted to cite.
A Rule-based approach to fiscal and monetary policies for an impersonal governance cannot be implemented, strong institutions, stability and growth cannot exist unless Lebanon is liberated from the politico-economic nexus of Hezbollah and its accomplices.
It is the duty of the Sovereign members of parliament to destitute them from their “democratic legitimacy” in the coming presidential elections. Another failure is “the path of no return”.
مصلحة الأساتذة الجامعيين في حزب القوات اللبنانية