WED 30 - 9 - 2020
Date: May 8, 2020
Source: The Daily Star
Lebanon: Govt reforms key to gaining support for plan
Hussein Dakroub| The Daily Star
BEIRUT: Talks hosted by President Michel Aoun Wednesday have fallen short of securing wide political support badly needed for the government to press ahead with its economic rescue plan and seek financial assistance, analysts said.

They stressed that the government needed to begin “executive steps” toward enacting long-awaited economic reforms in order to gain internal political support and encourage the international community to come forward with its promised financial aid to the crisis-hit and cash-strapped country.

Leaders of parliamentary blocs voiced support for the government’s economic rescue plan, and they pleaded with the international community and world financial institutions to stand by Lebanon as it grapples with the worst economic crisis in decades, according to a final statement issued at the end of the meeting at Baabda Palace.

However, the boycott by five parliamentary blocs of the meeting called by Aoun to discuss the government’s economic rescue blueprint cast gloom over the outcome of the gathering, designed to rally political support for the plan, which has already been criticized by MPs from various blocs, and has come under fire from the Association of Banks in Lebanon and the country’s private sector.

“The Baabda meeting was not attended by top political leaders and did not showcase the image of national unity,” Sami Nader, professor of economics and international relations at Universite Saint Joseph, told The Daily Star.

“Regardless of this matter [unity], the only thing that can give the government support is by taking executive steps toward reforms. The government is going for negotiations with the International Monetary Fund [on financial assistance]. Therefore, the important answer to Lebanon’s request [for aid] is that the IMF will tell the government: ‘Before coming to me, I want to see prior action on reform,’ ” said Nader, also director of the Levant Institute for Strategic Affairs, a Beirut-based think tank.

Likewise, Nader added, “the international community, whose door we are knocking on for aid, will ask us to carry out reforms. Therefore, whatever the economic situation and the financial crisis may be, the only thing that is bound to either refloat to bring down the government is: Will the government take practical measures toward reforms or not?”

Nader pointed out that Prime Minister Hassan Diab’s “divided government” began to face internal challenges after some essential parties in the Cabinet started to distance themselves from the rescue plan.

“Is this government, which is backed by political parties in power, particularly Hezbollah, capable of implementing reforms in public finances, namely the electricity sector, and create the political circumstances for the success of the economic rescue plan and going to the IMF? These political circumstances take us back to the government’s dissociation policy,” he added.

Hezbollah’s political opponents have accused the Iranian-backed party of violating Lebanon’s policy of dissociation from regional conflicts, with its deep involvement in the 9-year-old war in Syria and its interference in other regional conflicts.

Political analyst Kassem Kassir said the all-party talks in Baabda had helped defuse spiraling tensions between the government and Aoun’s mandate on the one hand, and the opposition, namely former Prime Minister Saad Hariri, on the other. The tensions arose mainly over the government’s performance and repeated statements from Aoun and Diab that blamed the crippling economic crisis on the policies of the past 30 years, a reference to the era when Hariri’s father, then-Prime Minister Rafik Hariri, was in power.

“There was a positive tone in Aoun’s and Diab’s speeches at the Baabda meeting toward their opponents. The Baabda meeting gave moral support for the government and opened the door to discussions on the financial rescue plan and the internal situation,” Kassir told The Daily Star.

According to Kassir, France and the United Nations through its representative in Beirut Jan Kubis, had prodded the rival factions to enter into an “internal dialogue to defuse tensions and ensure political support for the implementation of the economic recovery plan.”

He cited Monday’s ice-breaking meeting between Progressive Socialist Party leader Walid Joumbatt and Aoun at Baabda Palace as part of “de-escalation efforts.”

However, Imad Salamey, a political science professor at the Lebanese American University, viewed the Baabda meeting as a “coup d’etat” against the 1989 Taif Accord that ended the 1975-90 Civil War and stipulated equal power sharing between Muslims and Christians.

“The government plan has already taken the wrong step by sidelining the interests of the banking sector, on the one hand, and excluding the Sunnis, on the other,” Salamey told The Daily Star. “Therefore, the Baabda meeting appears as a coup d’etat in the making against the Taif economic and political arrangements while re-establishing presidentialism under Hezbollah mandate.”

He described the government’s economic rescue blueprint as “a formula that will hardly gain the appetite of Arab or Western interests to aid Lebanon.”

“All international signs, including that of Germany enlisting Hezbollah on its terrorist list, indicate tougher measures being taken against Lebanon, pushing it further into isolation and economic meltdown,” Salamey added.

Aoun and Diab were believed to be seeking parliamentary blocs’ support for the government’s economic recovery plan before entering into negotiations with foreign creditors on the restructuring of Lebanon’s $91 billion debt and with the IMF for financial assistance.

The Cabinet last week unanimously approved the economic rescue plan designed to halt the country's slide toward chaos and financial collapse.

The blueprint, which calls for a restructuring of the soaring public debt, the shaken banking sector and the Central Bank, is seen essential to encouraging the international community to extend desperately needed financial aid to the cash-strapped country. Diab said last week the government would ask for more than $10 billion from the IMF in the first phase of the loan plan.

In an opening speech at the Baabda meeting, Aoun said financial assistance from the IMF was "mandatory" for an economic recovery, as the country sinks deeper into financial turmoil.

The rescue plan comes against the backdrop of a series of economic woes, which include a devaluation of the Lebanese pound, a dollar liquidity crunch, soaring inflation, and the country's first sovereign debt default.

The pound has been selling for more than LL4,000 to the dollar on the parallel market in recent weeks in a record low. Although the official exchange rate remains fixed at LL1,500 to the dollar, the government's reform plan is based on an exchange rate of LL3,500 to the greenback.

Lebanese Forces leader Samir Geagea, a harsh critic of the government and Aoun’s mandate who attended the Baabda meeting, expressed his disapproval of the plan.

“We will not go along with the plan before the government closes all sources of waste,” Geagea told reporters after the meeting that was boycotted by Hariri and Joumblatt. He called on the government to revoke contracts with about 5,300 people who, he said, had been illegally employed before the 2018 parliamentary elections; reform the ailing electricity sector; control the illegal border crossings; and control the collection of Customs duties.

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