New Lebanese government could curb country's freefall

Lebanon's new Cabinet will focus on reforms to the electricity and banking sectors as their first priorities, an MP told The National, as experts expressed optimism for the future of the country.

Lebanese politicians agreed to form a new government on Friday after 13 months of wrangling over ministerial shares while the country sinks deeper into crisis.

The Cabinet, led by Prime Minister Najib Mikati, has the mammoth task of tackling a severe financial crisis that has pushed the majority of Lebanese into crisis.

Mr Mikati must also enact reforms that are crucial to access billions of dollars in debt relief and loans, and oversee parliamentary elections in eight months. After the elections, the Cabinet will resign, he said on Friday.

Political and financial experts are cautiously optimistic about the two-time former prime minister's new government. They say forming a Cabinet will help curb economic collapse but that a government spearheaded by Lebanon’s entrenched sectarian parties cannot truly solve the crisis.

“Lebanon was like a ship without a captain or sailors. Now that there is a crew, we have a chance, if not to reach the shore, at least to stop sinking,” banker Saeb El Zein said over the phone.

“Containing the downfall alone would be a big success. As Lebanese, that’s all we ask for,” Mr El Zein said, pointing to the Lebanese pound’s slight appreciation after the news as a positive sign.

The Lebanese pound has lost more than 90 per cent of its value since the onset of the crisis in 2019, pushing three quarters of Lebanese below the poverty line, UN data show.

Mr El Zein said if there is political will to pass reforms in Parliament, the current leadership could successfully negotiate a deal with the International Monetary Fund and gain access to loans to alleviate the effects of the crisis on people’s lives.

Negotiations broke down last year after disagreements between Parliament and the government over the scale of the Central Bank’s losses.

Mr Mikati said in a TV interview on Friday that his government will begin speaking to the IMF next week.

Reforms for cash

Forming a government capable of enacting reforms is the first step for Beirut to restart the negotiations with the IMF and other international lenders.

It was also the first key demand of an internationally backed road map set by French President Emmanuel Macron last September, to rebuild Beirut after the deadly port blast and to revive the economy.

For a year and a month, Lebanon’s political leaders bickered over ministerial shares of the Cabinet, halting any progress towards battling the crisis and gaining access to funds.

Parliamentarian Ali Darwish, of Mr Mikati’s Azm Movement, told The National that reform was now the government's number one priority.

“The first step for this government will be to work towards restoring people’s trust.

“The first shock will be a series of decisions that are in the people’s interests and reforms concerning the electricity file, fuel, the banking sectors and depositors’ money,” he said over the phone

International lenders and donor countries have asked for an overhaul of the state electricity provider Electricite du Liban (EDL), which swallows upwards of $1 billion per year despite providing one to four hours of electricity per day.

Lebanon has also reeled from shortages of petrol and medicines for months because the central bank is running low on foreign currencies needed to import subsidised products. Mr Mikati announced on Friday that the country can no longer afford to keep subsidies in place.

Curbing the crisis

While the new government may be able to curb the crisis, it cannot stop it in eight months or win the confidence of the Lebanese, said Fadi Ahmar, a Middle Eastern studies lecturer.

“This government lost the trust of the people before it was even named, because those who brought it to life are part of a despised political system,” he said.

Mr Mikati has already twice served as prime minister and is a billionaire businessman who is one of the richest Arab men in the world, Forbes has reported.

President Michel Aoun, who negotiated the formation of the new government, has been in power since 2016 and was a major figure of the country’s 15-year civil war.

Mr Ahmar says he is especially sceptical about the Mikati government’s ability to reform corrupt public institutions.

Shiite Parliament speaker Nabih Berri, Sunni leader Saad Hariri and Christian leader Gebran Bassil have used the public sector to grant jobs to their respective communities and win their support, he said.

“Why do we expect a government that follows the same sectarian politics that brought the country to its knees to actually save the country?”

With parliamentary elections coming in eight months, he expects politicians to work on short-term proposals that can garner popular support.

Parliamentary elections are crucial because they give political leaders legitimacy and determine who will succeed Mr Aoun as president. In Lebanon, Parliament votes for the president.

“They will work towards curbing the crisis, with short-term solutions, because it is in their electoral interests. But they cannot work to end the crisis because this will ruin their clientelistic networks,” he says.