Tough times call for tough choices in Lebanon
The situation is getting from bad to worse in Lebanon. On Saturday, Prime Minister Hassan Diab announced that the country will not honour its commitment to pay for a $1.2 billion Eurobond maturing on March 9. The government is now preparing for negotiations as it grapples with debt of more than $90 billion, about 170 per cent of the country's GDP. Another bond worth $700 million matures in April, and a further $600 million is due for repayment in June.
A significant slowdown in the Lebanese economy has led us to this juncture. Half of the population is living below the poverty line while 40 per cent of active population is unemployed. There's panic on the streets and uncertainty in the air, as the Lebanese become clueless about their present and the future. Frustration and poverty are prevalent and families with children are unsure if they will be able to equip their children well for the future. We are losing a generation to this crisis. Many parents can no longer pay school tuition fees, foot the bill for medical expenses, or even buy a chocolate bar for their kids as inflation has hit the roof.
It is no secret that Lebanon has been on the throes of an economic recession. The country is bankrupt and for now it is impossible to pay its debts as foreign exchange reserves have reached a worrying level. Meanwhile, the new government is in dire need to launch an urgent plan to make necessary reforms that can put Lebanon back on track.
The new government should be aware that it has to search funds outside the poor citizens pockets who can longer afford to pay their bills. For many years Lebanese have been paying exorbitant amount for basic utilities and also shelling extra on alternative services. For instance, they have to pay high price for electricity but they also have to pay to keep generators running in case of power cuts. The same is true for water services.
Today, the Lebanese are financially drained with the banks imposing restrictions on withdrawals. They can no longer pay taxes and are struggling to get food on the table.
The new government of Hassan Diab must play smart. The Lebanese are seething with anger and rage, the government must do everything to reassure them and not propel them to hit the streets again and cause riots.
Before announcing any new measures, the new government should really study if it is feasible to ask more taxes from the citizenry. Perhaps, it is now time to target the big fish rather the small ones.
After all, why should the Lebanese pay for their corrupt politicians whose greed knows no bounds. The government could soon announce some measures such as a discount or haircut on part of bank deposits, increase in VAT on select products, devaluation of the official parity rate of the Lebanese pound which remains arbitrarily fixed at 1,507.5 LL / USD against an unofficial rate which has exceeded 2,700 LL/USD.
Diab's government must take the right decisions before announcing any new measures or soon the Lebanese will demand the departure of this government as well, which could lead to an even worse economic scenario. Political vacuum, stalling reforms and postponing solutions could further push Lebanon to a darker future and God forbid a new war.
Christiane Waked is a political analyst based in Beirut