Lebanese officials promised to tax banks and slash their own pay as they unveiled an unprecedented package of measures to avert a financial meltdown and appease tens of thousands of protesters demanding they leave power, reported Bloomberg.
“Your movement is what led to these decisions today, the demands are many and justified, and varies but the clear demand that everyone united around was for dignity and respect and for them and their voice,” said Prime Minister Hariri.
The vision was met with scepticism by economists, not least because Lebanon’s budget deficit stood at just under 12 per cent of gross domestic product in 2018. And while the plans appear to meet demands for change that have gone answered for decades—including an end to electricity blackouts—they did little to calm tempers in the street.
Demonstrators gathered for a fifth day demanding an overhaul to the Lebanese political system which is based on sectarian power-sharing and the removal of a political elite they say has lined its pockets by exploiting poverty and differences.
The stakes are high for Lebanon, which straddles the region’s geopolitical fault-lines and has often been a proxy battleground for the Middle East’s broader conflicts.
Lebanon is one of the most indebted countries in the world and the country needs to find fresh sources of funding as the foreign inflows on which it has traditionally relied have dried up.
The reform package promises to impose a one-off tax on bank revenues and cut ministers’ salaries by 50 per cent. It also promises to implement the much-delayed restructuring of an electricity sector that loses $2 billion a year and to look at the possibility of selling off part of the telecoms sector, where a lack of competition has led to some of the highest costs in the region.
The government also pledged to meet the conditions required to unlock about $11 billion in international aid pledges made at a donor conference in Paris 18 months ago—a key to reviving a moribund economy and averting a debt crunch.
The International Monetary Fund projects Lebanon’s current-account deficit will reach almost 30 per cent of GDP by the end of this year. It predicts that economic growth, stagnant at 0.3 per cent in 2018, would continue to be weak. Public debt is projected to increase to 155 per cent of GDP by the end of 2019.
The financial crisis has been years in the making. For months, sporadic protests and strikes have erupted as a shortage of dollars squeezes businesses and threatens a currency peg in place for more than two decades.
Four ministers loyal to the Lebanese Forces, a major Christian party allied to Hariri, resigned from the government over the weekend, saying they had lost their confidence in the government’s ability to change. Other ministers have stayed on, saying they feared a vacuum would hasten the moment of financial reckoning.