Lebanon has made sacrifices, but for how long?
The Lebanese government has always remained officially neutral vis-à-vis the Syrian conflict and hence will be welcomed when the reconstruction of Syria begins.
Lebanon's President Michel Aoun recently asked the people of his country to tighten their belts and help save the country from the economic crisis.
"Everyone should make sacrifices to help the country get out of the current crisis. If we do not sacrifice today, we will lose a lot," Aoun said in a speech last week to mark the 74th anniversary of the Lebanese army.
The comments of the president sparked panic. A day after the speech Lebanon's five-year credit default swaps (CDS) rose to 990 basis points (bps), up 33 bps from Thursday's close, data from IHS Markit showed.
With $85.1 billion in debt, Lebanon is on the brink of bankruptcy. The country has amassed so much debt that it has become the world's third most indebted country.
Public debt has risen to over 150 per cent of GDP, which is unsustainable as per the International Monetary Fund. Lebanon has become a shadow of its former self with growth rate plummeting to less than two per cent last year. Just a decade ago the annual growth rate exceeded nine per cent.
Yet, not a lot of Lebanese agree with the president on the need for an austerity programme. Inequality is widening in Lebanon. Today the incomes of the 0.1 per cent of the richest Lebanese are equivalent to those of half of the population. More than 68 per cent Lebanese are living in extreme poverty. They are not the ones who can make sacrifices. The president, they feel, should direct his speech towards those who can.
The government must also be careful not to ask too much from the population that is financially and emotionally drained. Poking them any further could risk street riots.
Aoun does not deserve blame for the mess the country is mired in today. He inherited the economy in a bad state. His predecessors didn't manage the affairs well and lack of transparency in public dealings didn't help in accounting the flow of large sums of money.
However, Aoun must now tackle issues such as corruption head-on. Absence of a national budget allowed significant slippages in public spending.
The government has done well to at least have a budget in place now. On July 19 this year, the Lebanese Parliament tabled a budget to streamline public spending.
The 2019 budget document aims to limit the deficit to less than 7 per cent of the GDP by implementing austerity programmes and keep a check on misappropriation of public funds.
The budget deficit, meanwhile, has decreased by 28 per cent during the first four months of the year, announced Finance Minister Ali Hassan Khalil.
The budget had proposed measures such as a three-year freeze on government appointments, and stricter measures such as reducing the salaries of public sector workers, which has been rejected.
Lebanon is affected by the crisis emanating in Syria. The civil war in the country has led to an influx of Syrian refugees in the country, and has strained its resources.
With a population of about four million, Lebanon hosts the greatest concentration of refugees per capita in the world (more than 40 per cent of the demographic mass of Lebanon). This has created an overwhelming pressure on the country's utilities and stability. Nearly 2.5 million refugees from Syria, Iraq and Palestine have found refuge in Lebanon.
Stability and peace in Syria are crucial for the region. Lebanon could benefit with the reconstruction of Syria when the war ends. The Lebanese government has always remained officially neutral vis-à-vis the Syrian conflict and hence will be welcomed when the reconstruction of Syria begins, unlike the Nato countries, specifically France which the Syrian government holds accountable for supporting and backing the opposition.
The Lebanese port could be used to ship products, and the tourism and service industry could also see a revival as guests from across the world come to rebuild Syria.
Christiane Waked is a political analyst based in Beirut
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