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Lebanon's new government faces crucial challenges




The new Lebanese government held its first meeting around President Michel Aoun (photo: Lebanese Presidency)
The new Lebanese government held its first meeting around President Michel Aoun (photo: Lebanese Presidency)
LEBANON. Time is running out for the new President of the Lebanese Council of Ministers. Appointed on July 26, 2021 by President of the Republic Michel Aoun, Najib Mikati presented on Friday, September 10, 2021, his team of twenty-four ministers. On Monday 13 September 2021, he met them at the presidential palace in the presence of his tenant. "We will face great difficulties and we will work to find possible solutions," he said. Indeed, there is still one step to be taken: obtaining a vote of confidence from Parliament. And therefore present a roadmap, the ministerial declaration, acceptable to the majority of parties present in this chamber. Najib Mikati intends to propose a "comprehensive plan to end the crisis.

The composition of the new team was quickly criticised. As usual, it is the result of negotiations between the various communities, from which Lebanon cannot detach itself despite several declarations, including that of the president more than a year ago, and it remains far from the "mission government" advocated by the initiative of Emmanuel Macron to carry out structural reforms. The country has at least settled a political instability by giving itself the first government after thirteen months of waiting since the resignation of Hassan Diab following the explosion of the port of Beirut (200 dead and neighborhoods destroyed) in August 2020.

The IMF in support

However, there are still two major projects that are very closely linked: social and economic. With a major challenge: to act quickly to succeed in finally releasing the conditional aid promised by international donors. As well as those, essential for Lebanon's recovery, from the International Monetary Fund (IMF) with whom it will be necessary to quickly resume the negotiations interrupted in July 2020. Michel Aoun strongly wishes it, as he recalled on Monday 13 September 2021.

In parallel, the country of the Cedar will be able to count on $1.135 billion (€0.97 billion) in special drawing rights (SDR) allocated by the IMF, as announced by the new Lebanese Minister of Finance, Youssef Khalil, also Monday, September 13. This sum should be transferred on 16 September 2021 to a special account at the Central Bank of Lebanon (BDL). In early August 2021, Kristalina Georgieva warned: "It is imperative that SDRs are used in a responsible and informed manner. This is true everywhere, but it is particularly important for Lebanon, which is in a very difficult situation.  The SDR allocation is valuable. It must be used in the best interests of the country and its people. How to use it is of course a sovereign decision, but it is absolutely necessary to make a good decision. The Lebanese people have a right to know how these SDRs will benefit them. The IMF Managing Director strongly suggested four actions: tackling the fundamental problem of governance head-on (fighting corruption, managing public enterprises, auditing the central bank and the electricity company); implementing a fiscal strategy that includes deep debt restructuring and reforms to restore the country's credibility; a comprehensive restructuring of the financial sector by recognising the losses of private banks and the central bank; and establishing a credible monetary and exchange rate system underpinned by exchange rate unification.

Najib Mikati, a billionaire who made his fortune in telecoms, has already led Lebanon twice from April to July 2005 and then between June 2011 and February 2014. However, his task remains difficult for this third mandate with a debt reaching $100 billion (the third largest in the world), a currency, the Lebanese pound, which has lost more than 90% of its value and a country in a situation of suspension of payments since 7 March 2020. To this must be added the consequences of the Covid-19 pandemic, the lack of foreign currency, the shortages of fuel and medicines as well as the electricity cuts. Since the summer of 2016, Lebanon has been going through one of the worst economic crises in the world since 1850, according to a World Bank statement.

Frédéric Dubessy


Monday, September 13th 2021



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