Lebanon is in crisis and is asking for foreign aid

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L.Ebanon is “Days away” from a “social explosion”. That said Hassan Diab, the incumbent Prime Minister, on July 6th. The country is in a crisis in which the value of the national currency has collapsed and a large part of the population is short of food, fuel and medicines. “I call on kings, princes, presidents and leaders of our friendly countries, and I call on the United Nations and all international organizations to save Lebanon from its downfall,” Diab told a group of foreign diplomats.

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But foreign leaders don’t listen. Most do not trust Lebanon’s politicians. Mr Diab has served in a managerial role since a devastating explosion in the port of Beirut last August (the result of government neglect). For almost a year, the country’s sectarian and notoriously corrupt politicians failed to agree on a new government – and failed to implement the reforms demanded by foreign leaders.

Even if Parliament seems to be doing something right, there are doubts about its intentions. Take the recently passed plan to replace priceless food, fuel and medicine subsidies with a $ 556 million cash aid program for the poor. In a way, it followed the recommendation of the World Bank, which predicted in December that the Lebanese central bank (the Banque du Liban, or B.dL.) the reserves required to support the subsidy scheme would soon be missing. (The scheme had the B.dL. Dollars sold to importers of the covered goods at below market rates.) The World Bank was right and the B.dL. canceled or cut subsidies this year.

The old system could have been used in a more targeted way, since rich Lebanese consumed more of the subsidized goods than the poor. But the new system that has yet to be implemented is opaque. It is not clear who is entitled to the aid. Regardless, few people believe that Lebanon’s politicians will distribute it fairly. They have a history of bestowing the government’s generosity on their relatives and supporters (an election is planned for next year). Contracts go to the affiliates, resulting in unreliable services. So it is fitting that sweaty lawmakers passed the cash aid program in a meeting without a functioning air conditioning system, the result of an ailing and poorly managed power grid.

Funding for the cash aid program is also open. The central bank could pay for it, but reserves are running low and printing more pounds would increase inflation, which is sky high. External funding can be an option. Lebanon, for example, could use aid that the IMF donates to poor countries to help with Covid-related economic slowdown. The money should be delivered in the fall. Some officials want to redistribute loans already granted by the World Bank for other purposes.

The World Bank probably wouldn’t mind if more of their money actually went to help the poor directly. But the government lacks patience. In January, the bank agreed to lend Lebanon $ 246 million to expand the social safety net, including cash transfers for the poor. It would be an option to inject more money into this program – if the government ever implemented it. It has stalled for months because the World Bank and Lebanese politicians disagree about who gets the aid and how it is paid out. In short, politicians don’t like the idea of ​​world bank supervision.

In the coming weeks, the government is expected to present a detailed plan for financing and implementing the new aid program. But the Lebanese people are not holding their breath. Poverty rises, basic services fail and politics seem to be more concerned with protecting the patronage system that contributed to the crisis. Is it any wonder that Mr Diab’s requests fell on deaf ears? â– 

This article appeared in the Middle East & Africa section of the print edition under the heading “Begging for help”



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