The world has allowed the Lebanese economy to collapse – and the telecoms industry next – The Organization for World Peace

According to digital rights group SMEX, the Lebanese government recently announced that it would base telecom rates on a much weaker and more flexible currency rate. This makes the price up to four times higher. Rising prices will disproportionately affect Lebanon’s estimated 250,000 migrant workers. These workers must now have limited ties to their hometowns and ties to future employment.

This is not the first time telecom charges have raged in Lebanon. In the years leading up to 2016, the country had run out of options to rebuild its economy. Political divisions in the Middle East have slowed remittances from millions of Lebanese migrant workers. At the same time, the Sunni Muslim Gulf states have cut off financial aid to Lebanon due to the growing influence of Hezbollah, the heavily armed Shia political group in Lebanon. A solution to the country’s ballooning national debt has come from Lebanon’s central bank, Bank of Liban. The bank introduced “financial engineering” in 2016. This is the mechanism that gives banks huge profits on the new dollar.

The system had the potential for long-term success if reformed quickly, but it never materialized. Instead, dollar inflows into foreign exchange reserves received a much-needed boost, with debt rising soon afterwards. Some accounts said central bank debt exceeded assets.

Meanwhile, the cost to collect Lebanon’s debt has come to at least a third of budget expenditure.

To improve government revenue, politicians introduced plans to tax WhatsApp calls in 2019. Like recent price increases, this tax has disproportionately affected the poor, even as the already low tax rate skews in favor of the rich. Taxes were the last blow for the burdened Lebanese people, the economic crisis devolved into political unrest, and young and old militia leaders organized mass protests.

Shortly thereafter, foreign exchange stopped, banks were unable to pay their depositors and closed, and the government eventually defaulted on its foreign debt. These events were followed by the 2020 Beirut port explosion, the COVID-19 pandemic, and other humanitarian, economic and political crises, exacerbating an already apocalyptic situation.

At one point, the debt increased to 150% of Lebanon’s output. Power plants cannot supply power 24 hours a day, and Lebanon’s only reliable export is human capital. The World Bank’s Spring 2021 Lebanon Economic Monitor observed that Lebanon’s GDP recorded a 58.1% contraction, falling from his forecast of $52 billion in 2019 to his forecast of $21.8 billion in 2021. Did. Government revenues are estimated to be almost halved in 2021 and he to 6.6% of GDP, which is her third lowest percentage in the world. An estimated 75% of the population struggles with food security. According to World Bank estimates, the Lebanese disaster ranks among the top ten, and perhaps the top three, of the world’s worst crises since the mid-19th century.

These facts speak to the failure of the international and national response to the crisis in Lebanon.

“Intentional denial during intentional depression is creating long-lasting scars on the economy and society. More than two years after the financial crisis, Lebanon is on a credible path towards economic and financial recovery. We haven’t identified a path yet, or at least haven’t started,” said Saroy Kumar Jha, the World Bank’s Mashrek Regional Director. “The Lebanese government urgently adopts a credible, comprehensive and equitable macro-financial stabilization and recovery plan to avoid complete destruction of social and economic networks and to stop irreversible losses immediately. We need to move forward and accelerate its implementation of human capital.”

The World Bank has developed a strategy to revive Lebanon’s economy, with a particular focus on Lebanon’s immediate and short-term needs. This approach marks Lebanon’s inability to repay its debt and lack of foreign exchange reserves as the country’s core problems, and means that international aid and private investment are vital to the recovery.

The arrangements are in place for Lebanon to receive assistance. In 2020, the World Bank Group, the European Union, and the United Nations formed the Reform, Recovery and Reconstruction Framework (3RF) to address Lebanon’s short-term needs. Part of this effort included the creation of the Lebanese Finance Facility to “pool grant resources and enhance consistency and coordination of funding.” However, these initiatives have not achieved anything worthy of note. Lebanon’s reconstruction will require long-term direct financial assistance, which is unlikely to happen without extensive reforms from within.

France leads the international community’s response to Lebanon, urging the country to implement reforms to tackle corruption and attract donors. The International Monetary Fund also followed suit, urging Lebanese authorities to “implement some key reforms” ahead of the IMF Executive Board meeting when discussing the transfer of aid earlier this year.

Until recently, Hezbollah has led the Lebanese resistance to reform. But after his May elections this year, Lebanese voters elected his 13 independent candidates from the “change the opposition” movement, ending Hezbollah’s parliamentary majority. Internal divisions can complicate the work of these independent candidates, but change at any level within government shows great potential for reform.

Another aspect of the World Bank’s Lebanon strategy includes a debt restructuring program. However, this requires a functional understanding of that liability. Politicians and bankers must agree on the exact size of Lebanon’s debt before anyone can end the economic crisis. Without knowing the exact debt to collect, it is impossible to develop an effective financial strategy.

Other elements of the World Bank plan include the restructuring of the financial sector to help banks meet their debt obligations, a new monetary policy focused on stabilizing the exchange rate, reducing government budget deficits, and social assistance. including improved social protection support, especially for poor and vulnerable households. The plan identifies the power sector as a particularly vulnerable area in need of urgent assistance, so recovery efforts should focus support there.

The World Bank plan is promising, but needs a more coordinated effort and approach developed from within Lebanon. Most plans for Lebanon come from international sources such as the World Bank and the US Institute for Peace. For example, the Middle East Institute, a non-profit think tank based in Washington, DC, argues that US diplomacy “should promote the formation of alliances.” [Lebanese] A government that can set aside sectarian partisanship and begin to address Lebanon’s colossal challenges. ” Such a government would be incredibly beneficial to achieve the political reform Lebanon desperately needs, but the push for that government should come from the Lebanese people themselves, not the US government.

While such plans have been crafted by the world’s best economists, the needs of the Lebanese people themselves should always come first. This is not to say Lebanon is responsible for being too reluctant so far. Rather, the current disaster is the fault of the political and economic elite and has occurred despite the resistance of the Lebanese people.

The Lebanese people must continue to stand up to the officials who constantly ignore and even facilitate their suffering. The selection of 13 independent candidates was a promising start, but they still need to pick a strong candidate in the upcoming presidential election later this year. Lebanese citizens may not have the right to directly elect their own president, but they can influence the outcome by expressing their support and/or opposition to the candidate. With sufficient systematic action by the Lebanese people and pressure from potential international donors, the government can implement reforms.

We must revive the Lebanese economy. Each week that this crisis continues to pass is a week of injustice that must be restored.

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