Lebanon’s entire government, including its prime minister, has resigned amid public outrage over the explosion in Beirut last week that killed more than 200 people — throwing the country into even more chaos than it’s already in.
Lebanese citizens directly blame the government for allowing nearly 3,000 tons of an explosive substance to remain in a warehouse near the port for six years until a fire detonated it last week. People are also angry at the current government for plunging the nation into a deep economic crisis.
The country saw violent protests over the weekend in which demonstrators clashed with police, took over Lebanon’s Foreign Ministry building and other government agency headquarters, and displayed banners reading “resign or hang.”
The outrage clearly had an impact. By Monday morning, four Cabinet ministers and nine members of Parliament had resigned. Rumors started to swirl that the nation’s government would soon fall, and hours later it did, with Lebanon’s health minister telling reporters following a Cabinet meeting that the entire Cabinet had resigned. Prime Minister Hassan Diab formally announce his resignation at 7:30 pm local time.
Until a new government is formed, Lebanon will be led by a “caretaker government,” which can’t propose laws or executive measures.
The move has its pros and cons, experts say. On one hand, having no leadership with a political mandate will make it harder to steer a national recovery from the blast, the collapsing economy, and the worsening coronavirus outbreak. On the other, weakening a government with Hezbollah — a Shia Muslim party and militant group with close ties to Iran that the US considers a terrorist organization — as a key player may help bring in much-needed foreign assistance and quell local unrest.
On Sunday, world leaders pledged nearly $300 million in aid for Lebanon during a virtual conference, but wouldn’t offer more funds until the Lebanese government has instituted significant reforms.
“There is just a recognition that to attract international support and avoid a breakdown in domestic security, the reset button needs to be pressed,” said Faysal Itani, a Lebanon expert at the Center for Global Policy think tank in Washington.
But that same reset button was pressed less than a year ago: Last October, Lebanon saw mass protests against government corruption and austerity measures, leading to the then-prime minister’s resignation. Now, as Prime Minster Hassan Diab steps down along with other top officials, Lebanon will have to find its third political leader in under a year.
Whoever eventually takes the job will face an immense set of challenges, including handling simultaneous spiraling economic and public health crises and trying restore the public’s faith in a governmental elite that has long failed them. That’s much easier said than done.
The nation’s leaders mismanaged the economy for decades with a Ponzi-like scheme whisking away the hard-earned money of Lebanese people from banks to keep the government afloat, pay off public debts, and line the pockets of those in charge. The troubled policy screeched to a halt after the country’s banks simply ran out of money last year — meaning Lebanese workers lost savings they’d stored in accounts and expected to be available when needed.
And the big explosion that rocked Beirut last week, likely set off by 2,700 tons of ammonium nitrate stored in a port warehouse for six years, showed how Lebanon’s leadership didn’t bother to remove a dangerous substance despite plenty of time and ample warning.
Which means the new government, whenever it assumes power, has no time to waste to put the pieces of Lebanon back together. “There are many difficult decisions to be made,” Itani told me. “Lebanon should be hoping for a quick Cabinet formation,” though it’s unclear when or exactly how that will happen.
Few, however, expect much to change after the mass resignations. Corruption runs deep among the nation’s elites, experts say, and the fact that those in charge during the blast have left government means they may escape culpability in the long run. This moment, then, may just be a big bump in an otherwise predetermined course.
How Lebanon’s government squandered the public’s money and trust
To understand how Lebanon got into this economic mess, you need to understand two things: 1) why Lebanon pegged its currency to the US dollar, and 2) how the government siphoned, and eventually lost, the money of Lebanese citizens from local banks.
Let’s start with the lira-dollar connection. As Washington-based Lebanese American commentator Hussain Abdul-Hussain explained it to me, Lebanon’s big economic play after its 15-year civil war ended in 1990 was to attract investors and tourists, and bolster its services sector. After all, Lebanon wasn’t big enough to have agricultural or industrial prowess, but it did have an educated population, skilled labor, and lovely sights for foreigners to visit.
Pegging Lebanon’s lira to the US dollar, which the government did in 1997, was meant to show the world Lebanon was a safe investment — but it wasn’t. Israel occupied southern Lebanon until 2000, and Hezbollah proceeded to fight with Israel many times, most prominently engaging in a month-long war in 2006. That kind of instability scared off multinationals and other investors, thus hindering growth over the long term.
Yet through all of this, Lebanon’s Central Bank kept the same exchange rate: 1,507 lira to $1. Lebanon is heavily dependent on imports — for example, about 80 percent of the food in the country is brought in from elsewhere, per the United Nations’ Food and Agriculture Organization. Adhering to the fixed exchange rate kept those prices down, thereby making products cheaper for Lebanese people to buy.
That worked for a time. But in recent years, remittances from expats and loans from countries like Saudi Arabia dried up, while government dysfunction and corruption depleted what resources Lebanon had left. Private banks tried to fill Beirut’s coffers with loans, which came mostly from US dollars Lebanese workers put into their accounts (people in Lebanon can pay for goods and services with either the lira or US dollars, and many carry both currencies in their wallets).
Most knew this was happening, but they were convinced not to withdraw their cash with promises of a great return thanks to interest rates up to 15 percent. “Hence,” Abdul-Hussain said, “the Ponzi scheme.”
Simply put, the government’s mismanagement saw it run out of funds, which in turn led private banks to lend it more dollars, which meant the bank’s customers saw their deposits run out. Repeat that process over and over and over again, and it was always likely nothing would be left for the government to borrow.
That long-predicted outcome came true last September as banks saw up to $100 billion disappear, according to government figures. That, among other reasons, caused the lira’s exchange rate to spike, and the Central Bank was out of options (read: other people’s money) with which to bring it back down.
Now the local currency is pretty much worthless. In the past month or so, the lira has lost about 60 percent of its value, and about 80 percent total since October. That’s made purchasing necessities like food difficult as those prices have gone up about 200 percent. As an example, the cost of two pounds of meat is now equivalent to around $33 — a figure so high that Lebanon’s Army stopped purchasing meat for its soldiers.
Such an economic crisis is bad at any point. But to have one rage well before a deadly blast decimates sections of the nation’s capital has put Lebanon in a really tight spot. Only international support could help at this point, but Beirut struggled mightily to attract any.
For example, the International Monetary Fund watched Lebanon’s leaders derail its economy for years, and in June the Central Bank saw about $49 billion disappear from its coffers — equivalent to about 91 percent of Lebanon’s 2019 economic output. Between that and having Hezbollah basically in charge of the country’s government, there was simply little appetite at the IMF to send much-needed billions in assistance to Beirut.
Now with the government in a caretaker role — weakening Hezbollah in the process — it’s possible Lebanon will get the help it so desperately needs.
What Lebanon requires to recover from the crises
On Sunday, world leaders vowed to give $298 million in aid for Lebanon during a virtual conference. French President Emmanuel Macron, who has taken on a global leadership role in helping Lebanon to bounce back, said during the gathering that “Lebanon’s future was at stake.” (It’s worth noting that France controlled Lebanon from 1920 to 1945, which explains Macron’s deep interest in the country and the Lebanese public’s general acceptance of the help.)
That money wouldn’t be conditional on what Lebanon’s government looks like or any reforms it would have to implement. Further support, Macron noted, would be conditional.
Still, the initial monetary injection is a start, even though it falls short of the billions required. In the meantime, that money could be put to use in four key areas identified by humanitarian groups.
About 80 percent of Lebanon’s imports came in through Beirut, and the port in Tripoli, which brought in the other 20 percent, can’t scale up. Some nourishment can come in via cargo planes, but that will increase the prices of the goods. The country’s economic crisis has already made most food items expensive for the everyday Lebanese person to buy, so the need to alleviate mass hunger is immediate.
It doesn’t help that the explosion also took out all but a month’s worth of grain stores.
Tripoli's port authority trying to allay fears of a food crisis in #Lebanon after the country's grain silos were destroyed in #BeirutBlast, says shipment of 5500 tons of wheat coming in from Ukraine today.https://t.co/gw9vxJ7FEl— Leila Molana-Allen (@Leila_MA) August 6, 2020
Beirut’s hospitals are already overrun with those wounded in the blast, while others sustained so much damage they can’t safely treat patients. People seeking professional medical attention, whether for explosion-related injuries or coronavirus symptoms, are being turned away in droves. “The situation is a disaster,” Pamela Makhoul, a nurse at St. George Hospital in Beirut, told CBS News last Wednesday. “There’s nothing left.”
It’s why Bujar Hoxha, the Lebanon country director for the aid group CARE, told me last week that aid groups in the capital are working overtime to set up field hospitals and bring in needed medicines and disinfectants to treat patients.
About 300,000 people have been displaced and now live without basic accommodations. Local groups are working to set up tents and other makeshift homes to keep the affected out of the elements and families together.
Mental health support
Lebanon was already in the midst of multiple crises: an economic one, a public health one amid the pandemic, and a political one. The blast has compounded the hardship, and many will need help to cope with it all. “These people were already facing immense trauma, but this adds more fuel to what they were feeling,” said Hoxha. “I don’t know how much more they can take.”
What a catastrophe. Not a single person I know in Beirut and around wasn't affected somehow. Broken glass, destroyed rooms, narrow escapes and many many losses. This is so hard to process.— Karl Sharro ***** ***** ***** **** (@KarlreMarks) August 4, 2020
I can’t remember the last time I stayed awake all night like that, traumatized, alert, shaken, hurting. People I know are dead, injured. The devastation is indescribable. Beirut is broken. #BeirutBlast— Dalal Mawadدلال معوض (@dalalmawad) August 5, 2020
As the future of Lebanese politics gets sorted out, then, humanitarian workers plead that support keep pouring in to fill the void. “It’s important to continue to support Lebanon and its civil society,” said CARE’s Hoxha.
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