Protesters’ reform or resign calls turn up heat on Hariri
Lebanon’s Cabinet backed Prime Minister Saad Hariri’s economic reform package in a bid to ease anger on the streets as nationwide protests continued for a fifth day, but the proposal is unlikely to convince people to head home.
When he first responded to the protesters on Thursday night, Mr Hariri set a 72-hour deadline to pass proposed reforms that he said would address many of their demands.
With hours to go before yesterday’s deadline, Cabinet passed the blueprint, the headlines of which – all that has been announced so far – look ambitious.
By next year, it was promised, the country will have 24-hour power, something not achieved under any government in nearly three decades since the end of the country’s 15-year civil war. Non-essential ministries and government bodies will also be scrapped and bank profits taxed.
A new transparency authority will be established “soon” to investigate corruption – the minister for combating corruption in the previous government failed to make any major discoveries in two years.
The prime minister is considering how to privatise the telecoms sectors to increase competition, improve quality and cut prices for consumers.
Current and former ministers and MPs will also have their salaries halved.
But Mr Hariri’s proposal left those on the streets asking why, if a fix for Lebanon’s woes can be agreed in less than 72 hours, has it taken the government so long to act?
Wassim Mroue, the former editor of Lebanon’s Daily Star newspaper, said that people no longer believe the government’s promises, mirroring the sentiment of many on social media. The reforms are therefore unlikely to ease frustrations, with protesters out in force last night after decades of mismanagement and infighting from the government.
Lebanon’s debt-to-GDP ratio, about 150 per cent, is the third highest in the world, and its currency, which is pegged to the US dollar, is dangerously close to a devaluation. Markets, too, seem unconvinced by Mr Hariri’s proposals.
“The protests in Lebanon [and policymakers’ response] underline that pushing through with austerity, needed to stabilise the public finances, is politically impossible,” said Jason Tuvey, senior emerging markets economist at Capital Economics, a financial analysis consultancy. “Some form of debt restructuring appears inevitable ... and the chances of a messy devaluation and default are rising,” he said.
Lebanese government bonds tumbled as markets opened yesterday after a weekend of protests.
Mr Tuvey also pointed out that proposals to fix Electricite du Liban, the state power company, would not sufficiently improve public finances. Current electricity prices do not cover the cost of provision, leading to a $1 billion annual shortfall that the government has to make up. Politicians have avoided raising prices, but many people are forced to use generators owing to the lack of supply.
For years, the Lebanese government has supported its public finances by relying on local banks, which are often owned by politicians and who themselves rely on the Lebanese diaspora and remittances. When there is a more acute need, Lebanon has often turned to the West or to the Gulf for assistance.
But the government’s inability to pass the reforms needed to tap into $11bn of western aid promised at a donor conference last year shows the political paralysis Mr Hariri is facing from inside his own Cabinet.
Are four days of protests enough to focus the minds of ministers in a political system that requires near-complete consensus to get things done?
So far, ministers and MPs have pointed the finger at colleagues or tried to burnish their own image by reminding people of previous anti-corruption stances. Even the resignation of the four ministers of the Lebanese Forces has been read as political positioning by canny leader Samir Geagea, seeking to score points.
But protesters have made one thing clear – they blame the entire political class for the state of affairs, and all must go.
Mr Hariri said that if protesters want an early election, he would back the call. It would then be up to the demonstrators to select new candidates. But even then, they would face an electoral law written by the parties they seek to depose and a government selection process that requires consensus.
If the protests continue, this might be what is needed before the real battle for Lebanon’s future begins. In the meantime, the path ahead is likely to be economically painful, with those driven to the streets in exasperation the hardest hit.