In 2022, President Michel Aoun of Lebanon stepped down with no successor in place.
In order for the Lebanese Parliament to elect a new leader in the first round of voting, 86 of the 128 members would need to agree on a candidate. In June of 2023, Lebanon’s parliament failed to elect a president for the twelfth time since Aoun’s six-year term was completed. A Parliament divided – on the basis of International Monetary Fund (IMF) controversies and foreign influences – cannot see a clear future in its current state.
Although the mismanagement of Parliament dates back to the 1989 Taif Agreement – which ended the Lebanese civil war and implemented the sect-based government – the current political deadlock was catalyzed by the chaos of 2019-2022 during Aoun’s term. The Lebanese protests of Oct. 17, 2019, were instigated by the Lebanese cabinet’s new financial measures, such as Voice over Internet Protocols, and frustration over the circumstances that led to a 46 percent unemployment rate. Protests resumed again in 2020 and followed the port explosion in Beirut, as protestors gathered to call for the resignation of government officials – another symptom of a continuous deadlock.
The political eruptions had a direct effect on the economy, as GDP dropped from 51.61 billion U.S. dollars in 2019 to 23.13 billion in 2021, followed by the World Bank reclassifying Lebanon as a lower-middle income country. The 2020 explosion had 3.8-4.6 billion U.S. dollars in damages and 2.9-3.5 billion in losses, according to the Beirut Rapid Damage and Needs Assessment. Banking sectors had ceased lending and deposits, causing the storming of banks by depositors in 2022.
The political deadlock has directly impacted Lebanon’s relationship with the International Monetary Fund, which recommends various solutions to aid Lebanon’s deteriorating economy. The IMF has stated, “A new government [must have] the will and the mandate to implement the necessary comprehensive reforms [that are] critically needed.” With multiple recommendations from the fund, such as establishing a credible monetary and exchange rate system, electing a leader that would be in favor of working with the IMF would prove to further strain the deadlock.
In 2020, Hezbollah announced that it was opposed to allowing the IMF to handle the economic crisis, describing the IMF as an imperialist agent. Hezbollah continues to hold 13 out of 128 seats in Parliament, but following the end of President Aoun’s term, the group obstructed efforts to elect a president by casting blank ballots during electoral sessions. With the continuing deadlock and tug of war between Iran-backed Hezbollah and an opposing government alliance with closer ties to the U.S., Lebanon will not be able to create economic relief for itself.
According to a 2023 report by the Harvard Growth Lab, one solution for a sustainable economic recovery would be transitioning to a monetary system based on full dollarization, as a flexible exchange system with inflation-targeting mechanisms would create high interest rates. The report overlaps with IMF recommendations, as they propose to convert approximately 76 billion U.S. dollars in commercial banking to interim resurfacing certificates that would represent a claim on the government. The proposal was formulated on the basis of dollar deposits’ depreciation at the Central Bank of Lebanon.
The restructuring proposal would be in support of and accordance with the IMF program. This highlights another symptom of the deadlock, as the IMF stated that Lebanon needs to be “tackling head-on the fundamental problem of weak governance” and strengthening the anti-corruption network, which is becoming more difficult with the current regional crisis.
Strengthening the anti-corruption network does not seem plausible, as Lebanon’s role in the Israel-Hamas conflict has escalated significantly. Israel has targeted Hezbollah in recent bombings of Lebanon, and there are concerns of a full-scale invasion. Israeli-led violence in Lebanon has been backed by the U.S. – State Department spokesperson Matthew Miller stated that the U.S. supports Israel’s incursions to deplete Hezbollah’s infrastructure, as the U.S. believes it will achieve a diplomatic resolution.
The U.S. is the largest financial contributor to the IMF; this also means that it has the most voting power…and the strongest veto power. Researchers from a 2007 University of Chicago study concluded that, “For countries that are not strongly allied with the United States, the IMF would restrain fiscal and monetary policy expansion by setting tight conditions on loans.” With the IMF’s American influence and an unknown extent to which it could help, it is not likely that Hezbollah would support the fund in the future or that the fund’s best interest would be the security and recovery of Lebanon’s economy.
With an economy in need of restructuring and tensions rising in the region, Lebanon must elect a leader nemine contradicente who is prepared to take accountability and reverse the lack of transparency surrounding the Lebanese economy.
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