EXCLUSIVE Former Lebanese leaders ask for aid as blast compounds financial nightmare
Two former Lebanese prime ministers called on the international community to extend immediate support to the country after an explosion rocked Beirut on Tuesday.
“The scale of the destruction by any standard is more than an earthquake,” former Lebanese prime minister and finance minister Fouad Siniora told The National.
“Now there is a major crisis happening. There is no longer wheat and you also do not know [the level of the] pollution that has happened ... whatever food-related storage there was near the site is now not usable. It is a food security crisis.”
“What is required now is physical assistance, emergency aid, health assistance and immediate assistance that addresses the wheat shortage. What is required is a concerted effort. Lebanon needs intensive care [provided by] the international community after the erosion of confidence in the government.”
The explosion, which authorities said was caused by 2,750 tonnes of ammonium nitrate that ignited in a warehouse, killed more than 100 people and wounded more than 4,000.
Mr Siniora was in his office in Ras Beirut, about two kilometres from the site of the explosion, and said he felt the entire building move.
“This explosion was heard in Cyprus and it tells you the extent of the damage,” he said. “When they say Beirushima, they mean what happened is like Hiroshima.”
Lebanon was already grappling with its worst financial crisis since independence in 1943 and had defaulted on $31 billion (Dh114bn) of eurobonds in March. It turned to the International Monetary Fund in May for a $10bn bailout package but negotiations stalled, and the economy deteriorated further.
The Lebanese pound, pegged to the dollar since 1997, declined by more than 80 per cent while year-on-year inflation soared to 90 per cent in June. Unemployment is also on the rise.
“Definitely it’s a new page, it’s a new chapter in fact,” former prime minister and billionaire businessman Najib Mikati told The National.
“We were thinking the [gross domestic product] would not go down [further]. Now, definitely, it’s a fait accompli that the GDP is going to go down and down, because there isn’t anyone who has not been [affected] in the entire capital,” he said. “Productivity will stop for a couple of months definitely ... we’re dealing with catastrophic damage. We need help from everywhere.”
Trading on the Beirut Stock Exchange was suspended yesterday as a result of the explosion.
Mr Siniora and Mr Mikati declined to quantify the damage caused by the blast. However, Byblos Bank chief economist Nassib Ghobril said the retail industry, the private sector and banks would be the hardest hit.
“The explosion will definitely have a devastating impact on the economy. It’s too early to put a figure on the losses, but they are at least in the several billion dollars,” Mr Ghobril said.
“My estimate for economic activity in 2020 on Tuesday morning was a contraction of 18 per cent. Now, with what is happening, we are likely to see an even deeper contraction.”
The IMF projected a 12 per cent contraction due to the financial crisis and the impact of Covid-19.
Unemployment in the short term, given the devastation and its impact on businesses, is also expected to increase, Mr Ghobril said.
Beirut’s port receives and processes about 70 per cent of the country’s imports. The port in Tripoli, which borders Syria, is smaller but was recently expanded to take part in the reconstruction of Syria.
Its capacity, however, is smaller than that of Beirut’s port.
Imports will now be diverted to Tripoli as the port in Beirut has no warehouses left because of the destruction caused by the blast. The country also has a much smaller port in the southern city of Sidon.
Lebanon’s trade deficit narrowed by 59 per cent in the first five months of the year. It is now expected to worsen because of the explosion.
“We ask that our friends and allies stand by Lebanon; we require tremendous help,” Mr Siniora said. “The situation is extremely dangerous.”
The country’s former prime ministers were expected to meet yesterday to determine what the country needs and recommend a plan of action, Mr Siniora and Mr Mikati said.
Mr Mikati urged politicians across the spectrum to put their differences aside and come together.
However, Mr Ghobril said he did not believe the blast would hasten the pace of talks with the IMF or boost the size of financial assistance, given the lack of consensus among Lebanese policymakers.
The fund’s executives and Lebanese officials have held 17 meetings so far.
The IMF wants Lebanon to address seven priorities which include a crucial capital control law, a modification to the 2020 budget and a forensic audit of the Lebanese electricity company, which saps government coffers of about $2bn annually.
An agreement among Lebanese authorities on the size of financial losses incurred by the central bank also remains a key sticking point.
Any IMF funding agreement will depend on what the two sides agree on in terms of reforms and a timetable of their implementation.
“We may see financial aid or in-kind aid from countries around the world, but that is different [from] the negotiations and potential funding from the IMF,” Mr Ghobril said.
“If we see the materialisation of in-kind financial aid ... that might prove to be helpful to the economy, but that’s highly hypothetical at this stage.”
The economic crisis and the explosion laid bare the weaknesses of the Lebanese state.
“This is happening at a time when there is an erosion of confidence in the Lebanese government,” Mr Siniora said.
“The problem is compounded, as a result of this disaster, [which] requires a high degree of leadership to confront this problem and I don’t think that we have that leadership,” he said.
“This government initially did not prove in the last five or six months [that there is] any leadership and the president is absent,” Mr Siniora said.
“If they existed, they would have reached an agreement with the IMF. They are not aware. They are in complete denial about what is happening.”
Lebanon’s trade deficit, which narrowed by 59 per cent in the first five months of the year, is now expected to worsen