Hezbollah at the core of Lebanon’s financial crisis

Fouad Siniora said Lebanon is “sick and requires a stronger medicine than just ointments.”
Tuesday 10/03/2020
Concrete barriers erected by authorities to block a street hosting banks and financial institutions near the government palace in Beirut, Lebanon, January 24. (Reuters)
Concrete barriers erected by authorities to block a street hosting banks and financial institutions near the government palace in Beirut, Lebanon, January 24. (Reuters)

LONDON - Lebanese political circles considered Prime Minister Hassan Diab’s announcement about default on repayment of the public debt does not necessarily mean the bankruptcy of the state treasury, even though Diab admitted that treasury reserves were critically low.

Sources said negotiations about rescheduling Lebanon’s debt, which total about $5 billion this year, would start by the end of March. Political circles stressed that, with an aggressive campaign against the International Monetary Fund (IMF) before the government’s decision, Hezbollah conducted a coup against the Lebanese financial system and free economy.

Former Lebanese Prime Minister Fouad Siniora warned that Lebanon was heading towards the unknown, blaming Hezbollah for refusing to cooperate with the IMF without offering an alternative way out of the crisis.

Siniora said Lebanon is “sick and requires a stronger medicine than just ointments.” He stressed that the Lebanese are paying the price of “Hezbollah’s hegemony over the state and its refraining from implementing reforms pledged by the state since the Paris 1 and Paris 2 conferences.”

On the other hand, former MP Fares Saeed said Hezbollah was “trying to establish an economic and political system in Lebanon that matches the party’s regional function” and install a “resistance economy.”

While Siniora preferred to refrain from fuelling fear, considering worries about the collapse of the state’s finances, he nevertheless criticised the Diab’s speech March 7, during which Diab blamed the crisis and Lebanon’s failure for the first time to pay its public debt on the “erroneous” financial and economic policies over the past 20 years.

Diab reiterated criticism of policies of the governments of Saad Hariri and Siniora without referring to them by name. He blamed previous governments for letting the public debt grow to more than $90 billion but overlooked the disastrous consequences of the efforts of the March 8 Alliance to sabotage Lebanese-Arab relations, especially relations with Gulf countries and Saudi Arabia, which had shored up Lebanon’s finances with deposits in the central bank.

Siniora pointed out that Lebanon’s foreign policy “has been for years contradicting the interests of the Lebanese and was biased towards axes in the region — specifically Iran… Refusing to conduct reforms exacerbated the crisis.”

He recalled that former President Emile Lahoud “refused in 1998 to pass reforms despite approving the grids of ranks and salaries that were part of those reforms.” He spoke of reforms put forth during the Paris 2 and 3 conferences and Lebanon’s commitment to them but there was a retreat from those commitments in parliament; there was an insistence on passing “onerous” bills without necessary funding. The deficit in the balance of payments has been growing since 2011.

Siniora stressed the need for financial, monetary, sectoral, administrative and political reforms. He talked about “the problems that have accumulated,” especially during the era of Lebanese President Michel Aoun, and internal imbalances created through the so-called explicit violations of the constitution and of the Taif Agreement, “without forgetting the domination of the state by political and sectarian parties, including Hezbollah.”

Siniora said Lebanon is “sick” and the first step should be to “acknowledge its illness and be convinced that treatment is the best available way out.

“I think that we shouldn’t have to repay the amount due but I think this is a detail that must have come as part of a comprehensive settlement and a clear plan that adopts reform programmes in cooperation with the IMF. Hezbollah has refused this course of action but offered no alternative, thus taking us to the unknown.”

He noted that what Diab said indicated a desire to throw accusations while “we need to have a stamp of credibility” with the IMF but Hezbollah is brandishing the threat of what it called a “popular revolution” if Lebanon cooperates with the IMF.

Siniora concluded that “it has become necessary to get out of Hezbollah’s domination, as crises are no longer amenable to treatment with ointments.”

He drew attention to what the country has incurred as “the cost of domination over the state, the reluctance to reform and the cost of the Israeli invasions of Lebanon, which has become a ship without a compass being tossed around by the winds and no efficient captain that knows how to abide by the requirements of the compass.”

Saeed considered that the essence of the crises was in the fact that “Hezbollah is the political decision-maker in the country and, while fighting in Syria, Iraq and Yemen, it is trying to establish an economic-political system that matches its regional function, by overthrowing the Lebanese financial system and removing the country from the international community in the interest of a resistance economy… that is to say, importing goods through illegal channels and relations with Iran and China, in addition to severing all relations with Washington and the international legitimacy.”