Lebanon, officially known as the Lebanese Republic is a country in western Asia that shares its borders with Israel, Cyprus, and Syria. it was a part of the Ottoman Empire until 1918 and post-world war I was captured by the French. The French troops withdrew in 1948 and the republic was then born.

After its independence, the leaders created a political system to include the diverse populations that exist. They came up with a proportional representation modal wherein the three major religious groups- the Maronite Christians, the Shiite Muslims and the Sunni Muslims got the positions of the president, the speaker of the parliament and the prime minister respectively. The sectarian differences among these groups had led to a civil war in the 1980s that lasted for about two decades, with Israel and Syria also intervening. The Taif Agreement or Document for National Accord was then signed to mark the end of the civil war. It freed south Lebanon from Israel and set a time frame for the withdrawal of Syrian troops as well.

For the first time in Lebanon, the protestors are standing against the sectarianism. The waves of protests in Lebanon in recent weeks and the country’s political instability stem primarily from fundamental problems in the local economy, including the absence of reforms and the rampant corruption among the ruling elite and all government institutions. The downgrading of Lebanon’s credit ratings, lower growth rates, and high unemployment have sent the Lebanese economy to its lowest point since the end of the civil war. These developments are highly problematic for the country’s decision-makers, including Hezbollah. Israel, for its part, is monitoring the developments, which inter alia could lead to a strengthening of Hezbollah.

Let’s try to understand this problem from different factors:

SECTARIAN: Lebanese religious leaders are treated as sole power holders of their sect and given enormous decision-making power in religious affairs as well. However, their leadership is not organic and they are elected and backed by elite institutions. These leaders themselves do not incite sectarian rule, but their monopoly over religious affairs and their influence in politics surely does. The Taif Agreement did mention the abolition of political sectarianism as a national priority but it did not specify the timeframe. The religious leaders perpetuate the sectarian divide rather than promoting the inclusivity of the diverse cultures. This system, therefore, is being protested against as these leaders are warlords from the civil war and do not take accountability for their actions.

People are now taking on the streets and are opposing the very structure of the government. This structure is a major cause for government functioning as it makes it difficult to make political decisions across religious lines. In May 2018, Lebanon held its first parliamentary elections in nine years and Hezbollah—a Shiite political party and militant organization backed by Iran and designated by the United States as a terrorist group—increased its share of seats to 53 percent. A budget took 12 years to pass! And took three years to elect the president. To pass a decision requires 2/3rd of the majority, which means that the politicians need to look past their sect lines to have stability in the country. Unresolved sectarian differences eventually devolved into the civil war.

CORRUPTION: One of the major problems faced by the population is the rising level of corruption amongst the administration and the political leaders. The organization Transparency International ranks Lebanon 138 among 175 countries. This problem stems from the nepotistic behavior of the leadership and budget inflation did in order to get money in the hands of those in power. For example, in 2017 the salaries of those in the public sector rose by multiple percentages but for those in the private sector, the raise wasn’t that much. International politics also influence the corruption in Lebanon as the “maximum pressure” policy pursued by the US has hampered the Iranian economy and thus the aid given to Hezbollah by Iran had also declined, which incentivizes the politicians to extract money from the Lebanese taxpayers.

GEO-POLITICS: Lebanese politics have become a ground for politics for other countries as well. Iran which supports Hezbollah; and Saudi Arabia, which supports Prime Minister Saad Hariri and other Sunni politicians. Saudi Arabia held Saad Hariri under house arrest in November 2017, claiming that Hariri was not doing enough against the Hezbollah’s influence. Lebanon also suffers because of the refugee crisis hosting more than 1.5 million refugees out of which most are Syrian. The Syrian civil war has led to a weakening of trade and tourism in Lebanon. Hezbollah’s armed component has also been involved in the Syrian civil war, which has exacerbated ongoing tensions between Hezbollah and Israel along with the shared (and disputed) Israel-Lebanon border and has led to increasingly hostile rhetorical exchanges between Hezbollah and Israel over Israeli airstrikes in Syria. Hezbollah has allegedly supported Syrian President Bashar al-Assad since the start of the Syrian war, despite their Disassociation Accord.

Due to the increasing tension between Hezbollah and Israel, US policymakers are alarmed including many European countries. Lebanon needs to find a diplomatic solution to the Syrian war and have to control the growing control of Iran over the Economy.

ECONOMIC CRISIS: The economic crisis in Lebanon is the worst since the end of the civil war in 1990. The immediate trigger for the outbreak of the popular protest in October 2019 was a proposal to tax social media. Lebanon’s GDP was estimated at $56 billion in 2018, with an average annual growth of 1 percent reported over the last three years and only 0.2% growth is expected.  In recent years Lebanon’s economy has depended on banking (40 percent of GDP), as well as agriculture, industry, and tourism, which according to the IMF is at its strongest since 2010. In 2019 Lebanon’s debt-to-GDP ratio exceeded 150 percent and heralds a major crisis and swift downgrading in the country’s credit rating, with serious harm both to banking and currency strength, as well as to the ability to secure loans for debt redemptions.

In 2008, when the economies around the world were crippled with debt Lebanon offered something which was a very lucrative option for the investors. Lebanon provided high returns at low risk. The central bank paid so much because it badly needed a constant supply of dollars to maintain a currency peg against the US dollar, pay for imports and fund the government.  For more than two decades, the Lebanese have simultaneously used American dollars and Lebanese pounds, an arrangement made possible by a central bank policy that kept the exchange rate fixed at about 1,500 pounds to the dollar. The two currencies were used so interchangeably in daily life that it was common to pay for a meal or taxi in one currency and receive change in the other, or in a combination of both.

But to maintain the rate requires to continuously bring dollars in the country for which they enticed the investors with their low-risk scheme. Many economists call it a Ponzi scheme. “In some sense, that is the definition of a Ponzi scheme, other than the fraudulent part,” said Dan Azzi, a former Lebanese bank executive and advanced leadership fellow at Harvard. But recently the scheme wasn’t working this led to the downgrading of the country’s credit rating, with serious harm both to banking and currency strength, as well as to the ability to secure loans for debt redemptions. 2019 Lebanon’s debt-to-GDP ratio exceeded 150 percent and heralds a major crisis.

WHAT’S NEXT FOR LEBANON?: Among the stagnant economic growth and the slow inflow of FDI, the government is under pressure to curb the budget deficit. Proposals to cut the state wage and pension bill met a lot of opposition. The government vows to enact long-delayed reforms but fails to make progress that might bring in foreign support.

On the political front, an article by The Council on Foreign Relations expects Lebanon to become a nation now and not be a country governed by religious sects. The protesters have been demanding a new political system where they put forward a united national front with a single voice. The creation of a new political system will also be beneficial to third parties like the US as the present-day Hezbollah dominated Lebanon stands opposed to their policies. The financial and ideological backing provided to Hezbollah by Iran is also a major issue that has been causing various troubles.

The aid from the international community, especially countries like the US, Saudi Arabia, and some European countries will be a guide for Lebanon to resurrect their nation. The political leaders would have to come up with an efficient governance system that unites the population as a whole and not divide and oppress them for their religion.

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