In Lebanon, we are at a major survival crossroads and I am afraid that the shell-shocked population combined with the obstinacy and deafness of the rulers is going to lead very shortly to a catastrophic outcome in the form of two major crises.
The first crisis we will confront is that there will be no more Government delivered electricity because they cannot afford the fuel, and the second crisis will be that, the Government will run out of money to pay the subsidies for goods and fuel which are keeping the Lebanese people afloat (in light of the fact that over 50% of the population has now fallen below the poverty line).
With regard to the electricity crisis, a law was submitted recently by the MPs of The Free Patriotic Movement headed by Gebran Bassil, in which they asked for a 1,500 Billion Pounds as an advance to be paid to the Electricité du Liban (EDL).
Notwithstanding that this is an outrageous request after decades of wastage, mismanagement, and corruption which caused the Electricity Company to drain 47 Billion Dollars from The Central Bank, if the government agrees to give EDL the amount it is asking for – the advance of one Billion dollars – this will be followed by the immediate cessation of all types of subsidies on other goods such as medicine, flour, fuel, and diesel and the cost will ultimately be worse for the Lebanese.
So far, The Governor of The Central Bank, Riad Salameh, and The Head of the Caretaker Government, Hassan Diab, have stated their refusal to pay this sum from the Mandatory Reserve at The Central Bank. Beginning in the last quarter of 2020, The Governor sent clear signals to the political authorities that the funds at The Central Bank being used to cover subsidies are becoming depleted. Since then, about 4 billion additional dollars have been spent, and the reserve ceiling requirement of foreign currency has fallen from 17.5 billion dollars to just over 15 billion dollars.
This means, that at best, there are only two months of funding remaining for subsidized goods before dipping into the Mandatory Reserves which are made up of the hard currency deposits of local lenders at The Central Bank. The caretaker Finance Minister, Ghazi Wazni, has also issued a statement saying that by the end of May, Lebanon will soon run out of money to fund basic imports and that subsidies are costing $500 million a month.
In the meantime, remarks about a looming end to subsidies have triggered panic buying and fears of shortages and in a few months, things will get worse and poverty, misery and unemployment will rise even more. This will be followed by complete chaos and darkness.
Although The President, in his latest speech is claiming that a forensic audit is his priority, it is obvious that he is missing the mark again about what needs to get done first to help Lebanon navigate these very hard times.
What Lebanon needs immediately is a long term strategy to overcome the shortfalls in the Treasury that are going to lead to a complete blackout (which includes no refrigeration for foods, no internet for work, no lights etc.) and hyperinflation, leading to greater poverty and famine when the Government can no longer pay for the subsidies on basic goods.
Lebanon needs other rich nations to step in with aid and loans. We cannot do this on our own anymore. For this to happen, certain politically ambitious people must move out of the way to enable the formation of a respectable government. This will give Lebanon back its international credibility, and allow the country to re-enter into negotiations with the IMF and The World Bank, and to secure lasting solutions.
However, the opposite is happening. The president’s team (meaning his son-in-law), and their supporters are unwilling to help form a Government. Their intention is to ride out the present situation even if it means spending every last dime of the country’s reserves and the remainder of the people’s savings.
They have no problem to keep asking to cover any shortfall with the money left in the Mandatory Reserves. They are calculating that this will buy them one more year of time as they wait for the situation to change in their favor. This is also why they want to get rid of the Governor of The Central Bank who is acting as a roadblock to their intentions.
The bottom line is that, this obstinate and power hoarding leadership will not provide a solution for the salvation of this nation while they still have this remaining 15 Billion Dollars to spend. They will not agree to a new Government and they will very comfortably burn through the remaining reserves to stay in power and all the while they will let the Lebanese people be damned.
What I am saying is: be warned because this is the game at play. Solutions are available but the willingness to implement them is not.
April 8, 2021