Lebanon risks losing $11b in aid pledges
In April this year, over 50 countries, the World Bank, the International Monetary Fund and other important international organisations collectively pledged $11 billion to Lebanon to help it rebuild the nation. But six months on, the country has been unable to make good of the opportunity, primarily because of its failure to form a government.
Lebanon’s Prime Minister-designate Saad Hariri had promised to finalise plans for a new government after returning from the Future Investment Initiative conference held in Saudi Arabia recently. However, he is yet to submit a plan to the head of the state.
Understandably, it can be tricky forming a government in Lebanon because of the quota system. All sides need to consider their responsibility carefully before giving the lists of their ministers to the PM-designate according to the ministerial shares prescribed under the constitution. The prime minister-designate will have to check if the names given correspond to the denominational distribution. Often, last-minute changes are made, such as portfolio swaps to meet denominational quotas.
However, if the government continues to be stalled it could lead to severe consequences. Lebanon is struggling with the economy in recession. The unemployment rate is high and the infrastructure is crumbling and needs investment. Aid money could help rebuild Lebanon. Yet, the immaturity of the Lebanese politicians and their insistence on having the highest number of ministers might lead to the possibility of losing the aid budget.
The Lebanese must realise that such conferences cannot be taken for granted and the aid money pledged could have been granted to other countries in need.
The donors who committed to grant Lebanon
$10.2 billion in loans and
$860 million in gifts had argued that Lebanon should form a government before the cash flows to its troubled economy. In other words, Lebanese government must close the 2018 budget by the end of the year.
The donors realise corruption is rooted in the Lebanese system. Therefore, they have also insisted that the aid money must be used under international supervision, and this cannot be done in the absence of a functioning government.
The clock is ticking, December 31 is around the corner. Without a government, there is a possibility that Paris 4 could be replaced by a Paris 5 conference, which is going to take time to be organised again. While the Lebanese government faces bankruptcy, the monetary assistance from such a conference would help finance important investment programmes in different sectors, while reviving the agricultural, industrial and tourism sectors. Losing such an opportunity for a country like Lebanon would be suicidal.
Lebanon is the third most indebted country in the world. It has one of the world’s highest debt-to-GDP ratios. Its 149 per cent debt level of last year will be carried over to next year. And this debt has been affecting ordinary people in every aspect of their lives, and yet no efforts have been made by the government to save the day.
Recently, the global consulting firm McKinsey & Co proposed a wide vision for the Lebanese economy, advising the leaders on how the country can become a hub for wealth-management and investment banking and emerge as a provider of medicinal cannabis. The consulting firm’s report offered a roadmap to Lebanon, suggesting ways to utilise the financial aid committed to the government by participants in the Cedar Conference. However, it can only work when the Lebanese leaders get their act together and do what is in the best interests of the people.
The clock is ticking.
Lebanon is struggling with the economy in recession. The unemployment rate is high and the infrastructure is crumbling and needs investment