Site icon The Business Year

A New Dawn

After a nationwide political drama that kept Lebanon in limbo for nine months following the general election in May, the new cabinet lineup became clear in January 2019. Now, the new cabinet, heralded by Saad Hariri, is expected to bring Lebanon back to normalcy, putting an end to the country’s winter of discontent which was marked by protests against corruption and unemployment.

Some of the 30 newly appointed cabinet ministers have expressed their determination to initiate a series of—long overdue—political reforms, while Prime Minister Hariri has named the economy as the government’s focus.
The new cabinet has a lot on its plate. Lebanon’s mostly service-based economy has been suffering since the beginning of the Syrian civil war in 2011, with the annual GDP growth rate dropping from an enviable 8-10% between 2007 and 2010 to 0-2%.
With no government in charge, the economy declined further between May 2018 and January 2019, though the new cabinet’s formation acted as a minor positive stimulant for the economy.

Every Lebanese ethno-religious group is represented in the new cabinet, though some believe that the rise of Hezbollah and its Christian allies is threatening the long-established balance. The new players’ insistence on receiving the control of more ministries in Lebanon’s pan-sectarian government was one cause behind the prolonged limbo, and some critics claim that the cabinet’s lineup is not quite reflective of the nation’s votes in the parliamentary elections of 2018, meaning that Hezbollah now has a bigger say in the way the country is run.

In any case, the cabinet has won a vote of confidence in the parliament. There have been some welcome changes in the cabinet’s makeup, too: with four female minsters, this cabinet is less male-dominated than any government in the history of Lebanon.Raya Haffar Hassan from Future Movement was hailed as Lebanon’s first-ever female Minister of Interior. This was a progressive appointment as no woman has ever held such a senior post in the Arab world thus far.
Whatever their political affiliation, ethno-religious loyalties, or gender, the new ministers seem to be more technocrats—in a positive sense of the word—than political figures, as most ministers have some work experience or educational background in the area of their designated posts.

April 2018 saw an important international conference centering around the development of Lebanon, CEDRE. Hosted in Paris and attended by Emmanuel Macron along with representatives from the US, Saudi Arabia, and Russia, among others, the conference succeeded in securing approximately USD11 billion worth of international support for the Lebanese economy. Over USD10 billion of the aid will come in the form of loans and an additional USD860 million will be given to Lebanon as a grant. The country already counts on the aid to revive its ailing economy and improve its far-from-ideal credit rating. However, the donation will come with strings attached. The donors expect Lebanon to spend the aid on economic reforms. Saad Hariri has accepted the deal, promising to reduce the country’s budget deficit by an agreed rate over the next five years.
The aid will also be used to rebuild the nation’s infrastructure. Lebanon still bears the wounds of its civil war (1975-1990), while the country’s problems are compounded by an even-more ruinous civil war in neighboring Syria, which has forced over a million refugees to cross the border.

For reasons beyond the scope of this article, Lebanon’s electricity sector has remained underdeveloped after the war. The country’s aging electricity infrastructure is inefficient, forcing the government to spend USD1-1.5 billion—and even USD2 billion if some estimates are to be believed—on fuel for power plants alone. Even this does not guarantee 24/7 reliable electricity, which harms tourism and industry.

Lebanon’s excessive spending on electricity is, in part, responsible for the accumulation of debt, and a reform in the sector cannot be delayed any longer, according to the World Bank. The new cabinet has realized as much and wants to stabilize the country’s budget deficit by prioritizing the renovation of the electricity infrastructure as well as other measures such as raising certain taxes and putting in place austerity measures.

In doing so, the cabinet will be motivated not only by an urge to prove itself but also by the fear of losing some of the promised aid if reforms fail to progress as planned.

Exit mobile version