Lebanon’s political deadlock burdens economy
Beirut - Lebanon seems unlikely to sort out its political mess anytime soon despite pressure by international institutions worried about the economic toll, which is raising fears about the country’s stability as the war in neighbouring Syria continues.
World Bank President Jim Yong Kim, during a joint visit with UN Secretary-General Ban Ki-moon to Lebanon on March 25th, expressed frustration at Lebanon’s political paralysis. Kim cautioned that good governance was essential to prevent conflict. The day before Ban had urged Lebanon’s political powers to end the presidential vacuum “as soon as possible”.
Ban’s comments came 24 hours after a parliament session to elect a new head of state failed for the 37th time to secure a legislative quorum because of sharp rifts among political blocs. Hampered by sectarian tensions, Lebanon has not passed a budget since 2005 and has been without a president for almost two years, preventing vital legislation from being enacted.
Electing a president, passing a general election law and voting for a new legislature were key recommendations in a road map for ending Lebanon’s economic ills proposed by the Ministry of Economy and Trade. These recommendations were needed to “revive constitutional institutions”, according to the plan filed to the cabinet.
The dispute over a new election law has been going on since a 2009 vote produced a legislature whose 128 seats were divided between the Western-backed March 14 coalition and the Iran-backed March 8 coalition, with a few seats going to independents. Since the government failed to have elections in 2013, parliament extended its tenure twice into a full four-year term.
Following the revival of constitutional institutions, “a budget for 2016 must be passed but it should rely on a clear economic plan and a law governing public-private partnership (PPP) to allow the private sector revive struggling public sectors, such as power generation and supply”, the Ministry of Economy and Trade plan advised.
“Lebanon needs a new president and regularity in the work of constitutional institutions to jump-start the economic cycle,” said Joseph Torbey, head of the Association of Banks in Lebanon. “The Central Bank’s wisdom is sustaining stability in the Lebanese currency at the time being.”
Parliament had a single legislative session in December to pass banking and financial reforms and approve needed credits by international and foreign donors. “Other reforms are still on hold,” said Jacques Sarraf, president of the Mediterranean Businessmen Union. “An example is the PPP draft law and updates to laws governing companies.”
Mohammad Choucair, chairman of the General Union of Chambers of Commerce, Industry and Agriculture in Lebanon, said good governance in the country is needed to help resolve issues such as poverty and employment. “This is needed to avoid economic collapse and social explosion,” he said.
Aid pledged by Kim and Islamic Development Bank (IDB) President Ahmad Mohamed Ali al-Madani focused on Lebanon’s 1.5 million Syrian refugees but included support for the host country’s infrastructure. “Much of this aid needs to be passed by parliament sooner than later,” a source at the World Bank’s Beirut office said.
Lebanon is home to more than 1.2 million registered Syrian refugees in addition to a few hundred thousand not registered but living in the country, making them nearly one-quarter of the country’s population of 4.5 million.
The World Bank granted Lebanon a $100 million loan to support educational projects but a development package from the bank worth nearly $1 billion was delayed by the political deadlock. “As long as the vacancy of presidency persists, national unity and Lebanon’s standing will remain fragile and incomplete,” Ban said.
Kim said the World Bank’s board decided to take the $100 million from a fund used only for the poorest countries and “provided today a very concessional loan for the education sector, again to show our appreciation for what Lebanon has done in educating refugees here”.
“We have signed five agreements worth $373 million. There is another agreement that will be signed soon, God willing, in which the amount will be $400 million,” Madani said. He added that several projects were under way and “we expect that during this year there will be agreements worth $220 million”.