Lebanon: A Country Stuck in Multiple Crises

January 01, 2022

Lebanon has been trapped in a seemingly endless turmoil since 2019 with little hope of any solution in immediate sight. The demonstrations which started as a response to the worsening economic situation and corruption in the political system have been haunting the country at regular intervals. Lebanon is facing a three-pronged crisis which has left it in a debilitated state on the economic and political fronts. While on the one hand, there had been a long-drawn political crisis resulting in almost a 2-year-long political deadlock in the country, on the other hand, the 2020 Beirut blast aggravated the pre-existing economic misery and brought the country close to a state collapse. Amidst the turmoil, in September 2021, the formation of a new government sparked hope for an improvement in the condition of the country. However, merely one and a half months later, the outbreak of a diplomatic crisis between Lebanon and the Gulf countries (UAE, Saudi Arabia, Bahrain and Kuwait), triggered by Lebanon’s former Information Minister George Kordahi’s comments over Iran-backed Houthi rebels in Yemen, has made the situation in Lebanon far more volatile. Not only has this proven to be the country’s worst economic nightmare, but coupled with the domestic unrest and pre-existing unstable political system, has made it immensely difficult for it to show any signs of recovery.

Political Instability

For Lebanon, maintaining political stability has been a major challenge. Since 2009, no prime minister has been able to serve for more than three years. One of the major reasons for this is the sectarian nature of Lebanese politics. The political system of Lebanon is such that the three key positions in government namely, President (Maronite Christian), Prime Minister (Sunni Muslim) and Speaker of the Parliament (Shia Muslim) belong to different religious affinities1, thus resulting in frequent dissents. Furthermore, the positions in the government are divided on the basis of quota among 18 recognised sects.2 Each group constituting the coalition has its supporters and claims to fight for the interests of the same. Thus, the leaders and the sectarian groups are continuously at loggerheads with each other.

In addition to this, the political elite are considered highly “self-centred” by the populace. They are accused of exploiting state resources and benefiting themselves at the cost of the public.3 They also collude with businesses and further their interests. Such discontent often takes the form of protests against the political establishment, making the government step down before the completion of its term. Instability of the government has a negative effect on the economy since there is persistent policy paralysis, further fuelling the anger among the already suffering population.

In October 2019, Prime Minister Saad Hariri resigned due to massive anti-government protests, and in a span of merely two years Lebanon has seen a change of four prime ministers. In 2021, under severe domestic and international pressure a new government was formed after intense negotiations with other partners. However, political instability still looms over Lebanon as the next parliamentary elections are scheduled for 27 March 2022, which means that the current government has only a few more months to govern. Under such a situation, one cannot expect the government to take any major steps to resolve the economic degradation.

Internal Disorder

Domestically, a strong anti-government sentiment has taken root in the minds of the Lebanese population, reflected in the frequent protests against the state. The major reasons for this include widespread corruption and the inability of the government to stabilise the economy, which has given rise to distrust among the people. Lebanon has seen a fall in its score along the Corruption Perception Index from 28 in 2019 to 25 in 2020, effectively a change of 10.71 per cent.4

Lebanon has also lately witnessed some deepening of sectarian divisions. In an unfortunate spate of events, a protest organised by Hezbollah and Amal in October 2021 against Judge Tarek Bitar, who is leading the investigation in the Beirut Blast case, turned violent after an unknown armed sniper opened fire on protesters.5 This resulted in an armed conflict between the Lebanese armed forces, predominantly Christians, and the protestors who were Hezbollah and Amal supporters. This was the first time after the Civil War (1975–1990) that violent armed conflict was seen on the streets of Lebanon.6

Lebanon is also undergoing worst times in terms of availability of essentials and basic utilities. The Beirut blast coupled with the pandemic has caused shortages of fuel, food and medicines. Fuel shortages due to foreign exchange crises have shut down its power stations. The dearth of sufficient foreign exchange has also been a roadblock in Lebanon subsidising imports of essential commodities such as food and medicine.7

While the Lebanese state has been facing challenges in ensuring employment opportunities for its citizens, the immigration of refugees from Syria and Palestine has exerted additional pressure on the state resources. According to the United Nations High Commissioner for Refugees (UNHCR) estimates, there are 1.5 million Syrians in Lebanon and approximately 0.2 million Palestinians.8

Another irritant in Lebanon is Hezbollah, which has become a major obstacle in maintaining stability in the country. It is a political party and paramilitary force as well as a designated terror group by the US.9 Its strong military power, share of seats in parliament and overwhelming regional support from Syria and Iran, make it indispensable in the government formation process.However, it has also attracted the disdain of the public for its involvement in corrupt practices, violence against Lebanese citizens and exercising harshmeasures against peaceful protestors. Its members were also summoned by Judge Tarek Bitarfor their involvement in the 2020 Beirut Port Blast case, to which they retaliated by protesting along with Amal supporters in October 2021.10

Additionally, Hezbollah also receives outstanding support from Iran and works as its proxy in the country thereby allowing Iran to use Lebanon as a playground to achieve its regional objectives. This has been a major reason behind the Gulf countries such as Saudi Arabia presenting an aggressive posture towards Lebanon as Saudi Arabia perceives Iran a major security threat in the region. It has also created a “state within a state” in Lebanon which is damaging its political economy and diplomatic standing, leaving the country isolated during difficult times.11

Struggling Economy

Lebanon’s unprecedented political, economic and diplomatic crisis has had major socio-economic outfalls accompanied by humanitarian misery. According to International Monetary Fund (IMF) estimates, “the economy has already contracted by about 30 percent since 2017 and is expected to contract further in 2021–22”.12 The economic contraction has resulted in a rise in the unemployment rate from 6.04 per cent in 2019 to 6.6 per cent in 2020.13 This has left many on the brink of impoverishment. According to the United Nations Economic and Social Commission for Western Asia (UNESCWA) estimates, the multidimensional poverty rate doubled from 42 per cent in 2019 to 82 per cent in 2021.14

The Lebanese Lira has also seen a 90 per cent fall in its value, aggravating general inflationary pressures with food prices experiencing a ten-fold increase.15 At the same time, the pandemic has taken a heavy toll on the economy and there is an urgent need for governance and fiscal reforms coupled with financial restructuring. In the light of the above, the IMF has made certain policy recommendations to get the Lebanese economy back on track. These include strengthening the anti-corruption framework and reforming the state-owned enterprises; debt restructuring to enhance credibility and expanding the social safety net; establishing a robust monetary system, unifying multiple exchange rates and implementing formal capital controls. In order to avail IMF’s assistance in pulling itself out of this crisis, the implementation of the comprehensive reforms by the new government is the need of the hour.16

Diplomatic Problems with the Gulf Countries

Lebanon’s troubled ties with Saudi Arabia has emerged as another major challenge for the Lebanese leadership. Right after Kordahi's comments, Saudi Arabia banned imports from Lebanon, recalled its envoy from Beirut and expelled the Lebanese ambassador. The Gulf countries namely UAE, Kuwait and Bahrain followed suit and took similar action against Lebanon’s diplomats and recalled their ambassadors from Lebanon. In addition to the Gulf countries, Yemen also recalled its envoy from Beirut on 3 November 2021. Thus, the fallouts of Lebanon’s discord with Saudi Arabia can be seen in its strained relations with the Gulf countries and the subsequent diplomatic boycott.

Saudi Arabia’s political influence over Lebanon has drastically diminished since 2017 after Saad Hariri’s abrupt resignation while he was in Saudi Arabia. It has also made its displeasure about Hezbollah’s growing influence in Lebanese politics evident and distanced itself from Lebanon in recent years. However, Saudi Arabia has enjoyed an upper hand with respect to its economic engagements with the latter. Lebanon's economy majorly depends on remittances from its diaspora. Of its approximately 5,50,00017 expatriates who work in the Gulf countries, 3,00,00018 work in Saudi Arabia itself.19 The current import ban will have a severe impact on the Lebanese fruit and vegetable trade with Saudi Arabia which accounts between US$ 20 million and US$ 34 million annually.20 The fall in the value of Lira has also made imports from Saudi Arabia costlier for Lebanon, further increasing its trade deficit.

Lebanon is also heavily dependent on the Gulf countries, especially Saudi Arabia, for oil. There has been an oil crisis in the country due to shortage of oil leading to petrol price hike thereby crippling the economy and triggering protests. The rift with the Gulf countries will act as a roadblock in seeking their aid to restore sufficient energy supplies.

Way Forward

To end the current crisis in Lebanon, efforts ranging from resolution of the diplomatic crisis to setting its internal economic condition and political system in order, are required. This can be achieved by addressing the problem of corruption, initiating economic reforms and establishing better relations with the Gulf countries. To end the diplomatic impasse, Kordahi resigned under severe pressure from all sides. Additionally, France along with Saudi Arabia has extended support to Lebanon in strengthening its army to maintain security and stability along with carrying out joint consultations on all issues.

Thus, in order to resolve these economic, political, diplomatic and humanitarian challenges, the Lebanese government needs to introduce reform measures immediately, without any further delay. These include restructuring the economic order, ensuring fiscal prudence, reforming the financial sector and recalibrating the monetary policy. Only with such measures in place, the country will be able to attract assistance from international organisations such as the IMF. On the diplomatic front, it is difficult to ascertain whether the resignation of Kordahi will aid in ending the diplomatic crisis, considering the influence of Hezbollah on Lebanese politics as a major source of condemnation by the Gulf countries. Furthermore, the extent and magnitude of the sectarian divide shall also have a major impact on the country through its direct implications for peace and development, thus having domestic and regional ramifications.

On the positive side however, outreach by the international community including countries such as Saudi Arabia, France, US and the UK along with the UN, after the Beirut Port Blast, has ushered in some ray of hope. On 9 August 2020, France hosted an international donor conference with the UN to support Lebanon and pledged US$ 298 million to the country. In August 2021, the US announced US$ 100 million humanitarian assistance for Lebanon.21 On 1 October 2021, the UN and humanitarian partners announced a US$ 383 million Emergency Response Plan (ERP) for Lebanon to provide critical life-saving assistance.22 However, the prolonged political crisis, social unrest and periodic violence in several parts of the country have discouraged the international community from dispersing aid to the country. Thus, Lebanon will be able to benefit from these aid initiatives only if it introduces systemic reforms and tackles the problem of corruption, which are its major handicaps.

Views expressed are of the author and do not necessarily reflect the views of the Manohar Parrrikar IDSA or of the Government of India.