Lebanon News

No progress on Cabinet, Lebanon given ‘one week’

School students protest in front of the Education Ministry in Beirut, Nov. 8, 2019. (The Daily Star/Mohamad Azakir)

BEIRUT: Despite a stern warning by the World Bank Friday over the impact of political squabbling on the dire economic and financial situation in Lebanon, leaders have yet to make progress on the urgently needed formation of a new Cabinet.

Meanwhile the crises piled up inside the country as some gas stations closed early, hospitals announced a strike for next week and senior banking officials cautioned against a further delay in a political breakthrough.

This has led a serious drive by the international community to intervene and try to help as a top French official is set to visit Beirut next week.

The World Bank’s regional director Saroj Kumar Jha said the organization was “very concerned” that the delay in government formation “will impact the Lebanese poor people, middle class.”

In an interview with the Associated Press, Jha stressed that “it is extremely important that there is a political solution to the ongoing crisis and [that] we have a credible government in the office, which can launch ambitious bold reforms for economic stability.”

The World Bank director also cited the recent downgrading of several Lebanese banks showing “that the confidence in the Lebanese economy is very sharply declining.”

Jha said that a new government should be formed “within a week” in order for Lebanon not to face more severe risks.

“If there is a government within a week, first of all it will send a very positive signal to everyone. To the markets, investors, to the international community,” Jha told AP.

According to Jha, before the protests the World Bank was projecting 0.2 percent negative growth in the local economy. Now the “contraction in the country’s economy could be about 1 percent of the GDP, which is quite substantial,” translating to around $600 million-700 million in economic losses per day.

Christophe Varno, responsible for France’s MENA affairs, is set to arrive in Lebanon Tuesday. “The French are afraid of a security incident and don’t want this to happen. They are expected to bring proposals for finding a solution,” a political source told The Daily Star.

“This trip was not scheduled before the recent events in Lebanon,” the source added. French Ambassador to Lebanon Bruno Foucher met with Lebanon’s caretaker Foreign Minister Gebran Bassil Friday.

Despite all the red flags being raised, little progress was made Friday and no major meetings were held between sides to deal with the designation of a new prime minister.

Caretaker Prime Minister Saad Hariri is expected to announce his stance on whether he wants to return as premier in the coming days.

Lebanese Forces leader Samir Geagea accused Hezbollah of trying to form a government that resembled the outgoing one, including by insisting on the inclusion of Bassil. Geagea told Reuters that the LF would support Hariri to form an independent government only.

But he noted that there had been no progress yet, adding: “It appears to me that those concerned in the matter are behaving as if nothing has happened in Lebanon.”

Geagea also warned that financial difficulties could lead “big unrest in society.” “Imagine if people tomorrow can no longer find fuel, or they find fuel but at high prices, or ... they don’t find flour [or] they find it at high prices,” he said.

“I don’t know exactly what it would lead to. But in these cases, nobody can imagine anymore where things will go. We are in a very, very delicate situation,” he said.

Central Bank Gov. Riad Salameh met with Hariri at the latter’s Downtown Beirut residence stressing the need for a new government to be formed in order to restore confidence in the country. Salim Sfeir, the president of the Association of Banks in Lebanon, also called for a new government to be formed as soon as possible.

An announcement was made that banks would be closed from Saturday to Monday, raising fears over increased risks of withdrawing cash. However, Sfeir told local TV channels that this decision was strictly due to the national holiday marking the birthday of the Prophet Mohammad. For his part, MTV quoted BDL sources as denying any order to implement capital controls. Each bank is implementing the policy that it deems fit, the sources said.

Aoun later called a meeting with Salameh, Sfeir and other top bankers Saturday in Baabda Palace to discuss developments.

As gas station owners and fuel importers warned of an upcoming fuel shortage crisis, caretaker Energy Minister Nada Boustani said the government would import fuel directly if needed.

“Gas station owners and fuel distributors asked us to increase the prices of fuel, but we said no,” she said in televised remarks. Boustani stressed that the ministry is the one that sets the prices.

But the ministry is looking at ways to offer lines of credit to fuel importers, in cooperation with the Central Bank. “We are ready to help fuel importers, but we won’t accept a price hike” Boustani said, before assuring the public that a shortage of fuel isn’t expected.

While fuel companies are paid in pounds at the pump, importers must buy fuel from abroad in dollars and a shortage of dollars in the market has led to the outcry.

A version of this article appeared in the print edition of The Daily Star on November 09, 2019, on page 1.




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