Whatever the outcome of the Lebanese parliamentary elections on May 15, the new parliament will bear the responsibility of approving urgent bills and reforms required by the International Monetary Fund in order to support Lebanon, which has been mired in an economic collapse for more than two years, in addition to many challenges. Which he must deal with in the absence of a political consensus among the actors on the economic recovery plan.
The Big Crash
Since the fall of 2019, Lebanon has witnessed an economic collapse resulting from decades of mismanagement, and the political class giving priority to the principle of quotas and deals at the expense of structural reforms in administrations and service facilities. The outbreak of “Covid-19” starting in March 2020, then the horrific explosion of Beirut Port in August of the same year, worsened the situation, at a time when successive governments did not take any concrete measures to put an end to the deterioration and alleviate the suffering of the population, which has become more than Eighty percent of them live below the poverty line. In 2020, Lebanon defaulted for the first time on its foreign debt.
And on the impact of the collapse, which the World Bank has ranked among the worst in the world since 1850, the lira lost more than ninety percent of its value against the dollar, and the state’s ability to provide basic services such as electricity, fuel, and medicine declined, due to the dwindling of foreign currency reserves in the Central Bank.
The purchasing power of the population has also collapsed, as they are unable to withdraw their deposits due to tight banking restrictions. Tens of thousands of them have lost their sources of income, at a time when the minimum wage is equivalent to only $25. And large groups of the middle class and specialists, including teachers, doctors and nurses, chose the path of immigration, in search of new beginnings.
International Monetary Fund
After rounds of negotiations with the Lebanese side, the head of the International Monetary Fund delegation announced on April 7 that a preliminary agreement had been reached with Lebanon on an aid plan worth $3 billion over four years. All prior procedures and confirmation of financial support to international partners. Within the framework of the prior procedures required by the IMF, the parliament, according to what the Deputy Prime Minister, His Excellency Al-Shami, who is leading negotiations with the IMF explains, must pass the “Capital Control” bill restricting withdrawals and transfers of foreign currencies from banks, in addition to approving the “Capital Control” bill. The 2022 budget bill. The next parliament will have to approve these two bills. It will also have to pass legislation related to restructuring the banking sector and amending the law on banking secrecy. “We hope that the new parliament will quickly approve the four bills, which are prior procedures for a final agreement with the IMF,” Al-Shamy said. He explained that failure to do so would have “negative repercussions on the agreement with the IMF and on the economic situation.” At the beginning of the year, the Lebanese authorities estimated the size of the financial losses at about 69 billion dollars. Negotiations were made with the IMF on this basis.
Approval of reforms
Experts do not expect the elections to bring about a change in the general political scene in the country, which is controlled by traditional political forces, despite the chances of opposition groups and independents to cause a breach, albeit limited in several constituencies, which raises fears of widespread disappointment. This is the first general election after a massive popular uprising in Lebanon in the fall of 2019 that demanded the resignation of the political class and blamed it for the deterioration and corruption. “I expect a more divided parliament in which the opposition can be a force for change and reform,” said Sami Nader, director of the Mashreq Institute for Strategic Affairs. Prime Minister Najib Mikati said last week that Lebanon has “no choice but” to agree with the IMF. Fund officials were quoted as saying, “They have completed the required steps, and the solution wheel will start spinning quickly.” Restructuring the banking sector constitutes a major challenge, which the IMF considered essential to support growth, but the approval of the plan prevented it from obstacles, in light of the overlapping interests of the political class with the owners of banks. Al-Shami stresses that Lebanon “must first of all show commitment and credibility with regard to reforms before the international community commits to any financial support.” “The ball is now in our court,” he concluded.