Lebanon’s new government faces the challenge of rescuing the economy from a deep crisis marked by an $80 billion banking deficit and a 90% currency devaluation since 2019. Experts emphasize the urgency for transparent reforms, accountability, and international cooperation to restore trust. The country’s ability to secure aid is linked to the political landscape and the need for legislative updates to facilitate economic recovery.
Lebanon is at a critical juncture with the appointment of a new president and cabinet, raising hopes for a turnaround in its economic crisis that has persisted since 2019. The country faces a staggering $80 billion deficit in its banking sector, alongside a 90 percent depreciation of its national currency and stalled debt restructuring due to political disagreements. A delegation from the International Monetary Fund (IMF) recently deemed Lebanon’s economic reforms inadequate for receiving financial assistance, highlighting the nation’s heavy reliance on foreign reserves.
Prime Minister Nawaf Salam, sworn in earlier this year, emphasized his government’s mission to ‘rescue, reform, and rebuild’ Lebanon. Experts assert that substantial reforms are necessary to regain credibility and trust in the financial system. Fadi Nicholas Nassar from the Middle East Institute pointed out that despite the nation’s efforts to recover from multiple crises including the Beirut port explosion and a prolonged war, rebuilding trust is a complex and urgent task.
According to economist Jassem Ajaka, transparency in Lebanon’s financial sector is paramount. He advocates for an independent audit, the first since 2003, to ensure an equitable distribution of economic losses. Ralph Baydoun stresses that Lebanon’s access to international aid is contingent on implementing crucial anti-money laundering measures and reforms to restore confidence among foreign investors.
The financial burden placed on depositors has led to an ongoing crisis in Lebanon’s banking sector. Ajaka noted that restructuring, including potential mergers and asset sales, is necessary but must be grounded in a clear understanding of each bank’s financial health. Farida, an advisor, suggests a phased recovery plan focusing on small depositors while holding the financial elite accountable for the mess caused by their mismanagement.
Calls for transparent reforms have been echoed by the Depositors’ Union, which insists that accountability is the cornerstone of any recovery strategy. Furthermore, Hezbollah’s influence complicates Lebanon’s economic recovery, posing a challenge to restoring international trust due to its strong presence in local governance and military activities.
Consequently, expert Nassar argues that profound governance changes are essential, suggesting a shift away from patronage towards competence must occur for Lebanon to restore basic services like electricity. Baydoun notes that geopolitical tensions, particularly those surrounding Iran’s influence in the region, affect Lebanon’s ability to garner support from Western nations and the Gulf Cooperation Council.
The humanitarian implications of the economic crisis are dire. With the World Bank estimating that damages from the Hezbollah-Israel conflict amounted to $8.5 billion, the economic outlook remains bleak as the country is poised for its fifth consecutive year of contraction. A substantial reconstruction effort will require international financial assistance primarily from GCC countries.
Despite the challenges, Salam affirmed Lebanon’s commitment to reforms, prioritizing legislative changes to facilitate economic recovery. As the situation stands, Nassar stresses the importance of delivering tangible results to validate the new government’s legitimacy. Early projections from Moody’s suggest a potential recovery in economic activity, yet skepticism among international donors persists, necessitating actionable reforms rather than mere rhetoric.
Additionally, addressing structural weaknesses in Lebanon’s energy sector is vital for economic recovery. Haytayan, an energy policy expert, highlights that investing in the renewable sector and restructuring the electricity framework is essential for sustainable development. The country’s underdeveloped oil and gas sector is not a reliable source for economic recovery, thus requiring legislative clarity to proceed effectively.
In conclusion, addressing Lebanon’s economic challenges involves comprehensive reforms, transparency, and international cooperation. Experts emphasize that accountability, structural adjustments in governance, and a focus on key sectors are crucial to restoring faith in the financial system and facilitating sustainable recovery. Without decisive actions, Lebanon risks continued marginalization amid shifting geopolitical landscapes.
In summary, Lebanon stands at a critical turning point with a new government eager to address the ongoing economic crisis. Various experts suggest that transparency, accountability, and significant structural reforms are essential for recovery. The success of these initiatives hinges on both domestic governance changes and the international community’s willingness to assist, emphasizing the need for tangible actions rather than mere promises.
Original Source: www.arabnews.com
