Lebanon was considered for a long time “the window of the Middle East,” and that was built on the principle of individual, economic and cultural freedom, as well as freedom of expression, press, thought, belief, and enterprise. Today, Lebanon is going through one of the most devastating political crises of its century of existence, causing the collapse of our economic system: financial, social, cultural, sanitary, judicial and security.
Lebanon has a long history of political turmoil, and ongoing conflicts with neighboring countries which have led to a lack of stability and security in the country. Corruption is widespread; many government officials and politicians are accused of embezzlement and mismanagement of public funds. A complex system of religious and ethnic divisions has led to tension and conflict between different groups in the country. In addition, there has been a shortage of basic services such as electricity, water and sanitation, and healthcare which has led to a decline in living standards for many citizens. Lebanon is also facing environmental problems, including pollution, deforestation, and the over-extraction of natural resources.
The Lebanese government’s financial default in March 2021 significantly impacted Lebanon’s reputation and perception both domestically and abroad. The issue is in the lack of liquidity; they are not losses but obligations. This default decision, for the first time in the history of Lebanon, contributed to a further downgrading of Lebanon’s risk rating to a “default” level, cutting off much potential for both the government and the private sector to access international markets. The default has damaged Lebanon’s reputation as a stable and reliable country for investment and business. It is also considered a significant setback for the country’s economy – which has been struggling for years – and has raised concerns about the country’s ability to repay its debt. It has also highlighted the lack of political consensus and the inability of the government to implement effective policies. In addition, the default has also affected Lebanon’s relationship with international organizations, countries and lenders, which may be less willing to provide financial assistance in the future, given the state’s inability to repay its debt.
At present, Lebanon’s biggest problem is the lack of confidence among the public towards the government’s ability to effectively manage public resources and funds, as a result of longstanding failures to provide basic services like electricity and clean water, its failure to address the economic crisis or to hold officials accountable, and the failure to protect citizens from crime and violence.
Once the trust is rebuilt, then we can start rebuilding the country!
The country’s economic crisis has led to a downturn in the private sector; businesses are facing declining revenues, rising costs, and a lack of access to credit. This has led to a high rate of bankruptcies, closures and job losses in the private sector. The shortage of foreign currency is making it difficult for businesses to import raw materials, pay for labor, and service their debt, which has led to production cuts, supply chain disruptions, and reduced competitiveness. The economic crisis has also caused a fall in consumer demand as people have less disposable income to spend on goods and services which has decreased sales and revenues. Lebanon is struggling to attract foreign investment, as investors are cautious about putting their money into a country with a weak economy and high levels of political and economic instability. In addition, the crisis has led to a lack of access to credit for businesses, as banks are facing liquidity issues and are less willing to lend money, making it difficult for companies to invest and expand.
The government and banks need to service their liabilities rather than writing them off by creating adequate liquidity in the financial sector. Therefore, the prominent solutions that 100% Liban believe can resolve the crisis and aim to work on in 2023, are the following:
1. Protect all deposits: assure that deposits are fully protected and that any losses incurred by liquidated banks will be compensated through proper channels including corporatization of state assets.
2. The full liberalization of the exchange rate for all transactions (banks, the government, the private sector, and exchange houses), putting an end to the “dollar” myth and instantly unifying the value of the dollar. This process eliminates the threat of writing off citizen deposits and restores trust in the national currency and banks. Liberalizing the exchange rate has a beneficial impact rather than a negative one that results in inflation or its fall. Full liberalization of the exchange rate also creates liquidity.
3. Rescheduling all banking sector deposits and liabilities in order to provide the required liquidity to restore the economy, as well as rescheduling the sovereign debts and the cost of their service, taking into account a grace period of no more than two years.
4. Balancing the budget is a key ingredient to bring stability to the exchange rate, as its well documented that fiscal deficits contribute to balance of payments deficits and could become a factor in a spiraling depreciation of the currency.
5. Corporatization of state enterprises; a practical solution envisaged could follow by first improving the governance of the public sector through privatization of its management on a case-by-case basis starting with key enterprises: the mobile phone, the power sector, Middle East Airlines, the port services, the airport, and Casino Du Liban, as well as leasing oil and gas blocks.
The private sector’s role
The private sector, with its experts, can play an important role in rebuilding the Lebanese economy by:
1. Creating jobs: The private sector can create jobs by investing in new businesses and expanding existing ones, which can help to reduce unemployment and stimulate economic growth.
2. Attracting foreign investment: The private sector can attract foreign investment by showcasing the country’s strengths and opportunities, and by working to improve the investment climate. This can help to bring new capital into the country and create new business opportunities.
3. Improving infrastructure: The private sector can invest in infrastructure projects, such as building new roads, ports, or power plants, which can help to improve the country’s overall business environment and attract new investment.
4. Supporting Small and Medium Enterprises (SMEs): The private sector can support SMEs by providing them with financing, training, and other forms of support, which can help to improve their competitiveness and contribute to the growth of the economy.
5. Improving governance: The private sector can improve governance by promoting transparency, accountability, and good governance practices in the private sector, which can create a more favorable environment for business and encourage investment.
In order to support the private sector, 100% Liban will work to strengthen it by enacting laws to protect it and working directly with the government. By joining our parliamentary committee and our various sector committees, we hope to influence Lebanese politics to revive the economy and restore trust.