Lebanon has finally formed a new government headed by Hassan Diab and who faces the huge task of reviving the country’s economy.
Lebanon: can the new government revive the country’s economy?
The new Lebanese government that took office on January 21st faces “immense challenges,” according to the new Prime Minister Hassan Diab. The economic situation in Lebanon is one of the main reasons for the massive social protest which has been hitting the country for several months and which is still very lively. Can the new government really revive the country’s economy?
In Lebanon, “the banks are technically bankrupt”
The task at hand is huge, not to say practically impossible: the new government has to revive Lebanon’s economy, urgently! Let’s take a look at the context the government headed by Hassan Diab, and let’s especially focus on the banking sector.
In Lebanon, the economic crisis is coupled with a financial crisis. The country’s debt reached more than 150% of GDP, supported by private banks which had ensured the stability of Lebanon. The country is not in its first economic crisis, but the springs which have, until now, always allowed it to rebound seem broken.
Today, a lot of the international sovereign bonds are being traded at less than half of their normal market value. Moreover, Lebanese banks, short of cash, have restricted withdrawals, causing the fury of depositors. Lebanon could find itself in default on its debt.
Enormous pressure on the new government
Will the new government around Prime Minister Hassan Diab, appointed after the resignation of Saad Hariri, be up to the task? He did try to surround himself with “technocratic” ministers as demanded by the Lebanese men and women who have paraded in the tens of thousands on the streets since October 17th.
Hassan Diab not only has to face the pressure of the street but also that from abroad. US Secretary of State Mike Pompeo urged the new government to carry out “tangible” reforms. “Only government capable of […] real and tangible reforms can restore investor confidence and unlock international aid for Lebanon,” he said in a statement. As for French President Emmanuel Macron, he assured that France was ready to “do everything” to “help” Lebanon to emerge from a “deep crisis”