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22 January 2020
HALAL ECONOMY

Lebanon forms new government after three months of protest

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

Heavily indebted Lebanon has been without an effective government since Saad al-Hariri resigned in October 2019/Bloomberg

by Bloomberg

Lebanon has unveiled its new cabinet three months after mass protests against entrenched corruption brought down the government and shook the economy.

The incoming team of 20, led by former education minister Hassan Diab, will have to act fast to address the country’s worst financial and economic crisis in decades.

Tens of thousands of people have taken to the streets in recent months to demand an overhaul of the country’s sectarian power-sharing system, worsening economic conditions and rising investor concerns that Lebanon could default on its debt obligations for the first time.

Remittances and other inflows on which Lebanon’s economy has traditionally relied have plummeted as confidence has dwindled, prompting banks to impose informal limits on the withdrawal and transfer of hard currency in a bid to hold on to what remains of their reserves.

The Lebanese pound has weakened by more than a third against greenback on the black market since protests began in October 2019 triggered by plans to tax WhatsApp messaging application.

When he was first named as prime minister more than a month ago, Diab promised the people a government of experts to lead them out of the crisis.

Many of the new ministers are little-known to the public, having spent their careers in academia or the professional realm, but are still considered to have political loyalties.

Incoming Finance Minister Ghazi Wazni, for instance, is a well-known economist close to veteran parliament speaker Nabih Berri while Raoul Nehme, a well-known banker, was named minister of economy.

The Cabinet was agreed after more than a month of wrangling between Berri, Hezbollah as well as the Free Patriotic Movement founded by President Michel Aoun and a handful of other political parties considered by protesters to be part of the old regime that needs to go.

The 15-year civil war ended in 1990 but still haunts a country where the warlords became the rulers and have remained in power ever since.

Former Prime Minister Saad Hariri, resigned in late October 2019, had vowed to implement much-needed fiscal and structural reforms to unlock $11 billion in international aid pledged in 2018, but complained that political disagreements inside his national unity government hampered progress.

A conference of international backers convened in Paris in the midst of the protests has raised hopes among many Lebanese that the formation of a new government would accelerate access to that support.

Lebanon’s precarious financial situation has many investors pricing in a sovereign default. A $1.2 billion Eurobond that matures in March 2020 saw a record slump last week, fuelled by reports local lenders have been selling the instruments to avoid participating in a central bank-initiated voluntary debt swap.


RELATED STORIES: Lebanon Hassan Diab Saad Hariri Nabih Berri President Michel Aoun


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