Lebanon’s new government only ‘a band-aid’, experts say

PM Najib Mikati is optimistic about getting Lebanon out of mire, but analysts say economic recovery is not on the horizon any time soon.

Mikati: 'The situation is very difficult. But it’s not impossible if we united as Lebanese. We have to put our hands together.' [AFP]

Beirut, Lebanon – After 13 months of political gridlock, crisis-ridden Lebanon has finally formed a full-fledged government.

New Prime Minister Najib Mikati said on Friday his 24-minister cabinet consists of non-partisan specialists that are determined to reform the country’s haemorrhaging economy and pave the way for a recovery.

The new government consists mostly of newcomers backed by the country’s ruling political parties. It is set to meet for the first time on Monday, before presenting a policy statement to parliament which is expected to issue a vote of confidence.

However, analysts say Mikati and his government have much to do to stop Lebanon from economic freefall – with a turnaround not on the horizon any time soon.

“The current duty of the government is to first manage the crisis and postpone the downfall of the state and its institutions,” Yeghia Tashjian, associate fellow at the Issam Fares Institute for Public Policy at the American University of Beirut, told Al Jazeera.

“The formation of the government would play the role of the band-aid to temporary prevent financial bleeding.”

In less than two years, the Lebanese pound has lost 90 percent of its value on the parallel market and living conditions have severely worsened. State electricity is virtually non-existent, while fuel and medicine shortages have plagued hospitals and homes alike. The United Nations estimates that about three-quarters of the population now lives in poverty.

Officials have admitted that major economic restructuring would be necessary to make the country’s economy viable again. Previous prime ministers have described these reforms as “painful”.

One of the most urgent economic issues the new government has to address is the country’s expensive subsidies programme on fuel, medicine and wheat to keep them at affordable prices.

The central bank has urged to fully end the programme, as foreign reserves dwindle. In the meantime, shortages worsen, while hoarding and smuggling are rampant.

Mikati admitted that the subsidies need to be lifted. The outgoing government on Thursday launched a one-year cash card programme to throw a desperately needed financial lifeline to 500,000 vulnerable families.

Though short-term and modest, Tashjian believes that it could hold back some popular anger when the subsidies are lifted, and buy the government more time in the absence of sustainable economic reforms.

In addition, Mikati, a billionaire businessman with amicable ties to the international community, is expected to restart negotiations with the International Monetary Fund (IMF).

Previous talks fell through in July 2020 after Lebanese banks and lawmakers opposed the government’s economic recovery plan, despite the IMF’s initial approval.

“Mikati will do his best to ensure and restore his government’s credibility while negotiating with the international community,” Tashjian explained.

Setting sights on next year’s elections

Lebanon’s municipal and presidential elections are both scheduled for 2022, but all eyes will be on the country’s parliamentary polls, also due next year.

The international community has urged Lebanon to hold parliamentary elections on time, and not renew parliament’s term as it did from 2013 until 2018.

Political analyst Bachar El-Halabi believes the Mikati government will implement some small-scale “cosmetic” reforms and patchwork solutions to secure votes for Lebanon’s traditional sectarian parties to stifle political opposition.

“The newly formed government is expected to, first and foremost, soften the blow out of concern by the sectarian ruling elite – the usual suspects,” El-Halabi told Al Jazeera, explaining that the popularity of the ruling political class has severely declined in the wake of the economic crisis.

“The government will claim credit for the increase in [state] electricity supply,” the analyst predicted, referring to a recent fuel barter deal with Iraq.

“And it could tap into a couple billion dollars of international loans as a result of some cosmetic reforms it might implement to provide medication and fuel.”

The negotiations over sectarian and political allocation of the ministries between Mikati, President Michel Aoun and political leaders to agree on a government lineup were not unusual, but another case of Lebanon’s political horse-trading.

Tashjian, of the Issam Fares Institute, said the gridlock over several service ministries indicated that political leaders bickered over influence when it comes to implementing economic reforms and providing social services – in exchange for political loyalty.

“The current ruling elite will ensure their representation during the elections,” he told Al Jazeera, referring to Lebanon’s long trend of nepotism and political clientelism. “Thus the party that holds the key service sector will do its best to provide services in its constituents.”

It is this kind of politics that concerns Lebanon’s various opposition groups and political parties, which remain sceptical of the existing system delivering any meaningful reform and economic justice.

“This reaffirms what we said all along. They decided to reproduce their [sectarian] system at the expense of society,” Ibrahim Halawi, secretary of foreign relations of independent political party Citizens in a State, told Al Jazeera.

“The only belt that we will fasten as society is one in a crashing aeroplane, as the rest of society lives at the mercy of sectarian parties providing them with breadcrumbs.”

Source: Al Jazeera