Lebanese officials struggled this week to deny a blunt verdict on the country’s economic state issued by yet another senior official, this time the Deputy Prime Minister Saadeh Al Shami.
“There is a fact that cannot be ignored, we cannot live in a state of denial,” Al Shami told a local TV on Monday. “Unfortunately, the state is bankrupt, as is the Bank of Lebanon,” he declared. The statement sent shock waves across inside and outside the country although it wasn’t entirely surprising. Such a declaration had been expected at one point since Lebanon defaulted on its Eurobonds issue of $31 billion two years ago.
The economy has collapsed since and the currency lost nearly 90 per cent of its values. Inflation is said to be running at more than 200 per cent while the national debt has soared to $100 billion, more than double the GDP.
Al Shami’s statement stunned his colleagues because of its timing. It came while the country’s finance officials are locked in crucial talks with the International Monetary Fund (IMF) to provide Lebanon with another bailout package. That led senior officials to issue a statement after statement to deny what everyone has known for years — Lebanon is in fact bankrupt.
Al Shami was speaking about “liquidity, not solvency,” a statement from Prime Minister Najib Mikati’s office said. A statement sent to the media by Banque du Liban governor, Riad Salameh denied that the central bank is bankrupt. “What is being circulated about the bankruptcy of the central bank is incorrect,” he said. He added that there is a “recovery plan that is currently being prepared by the Lebanese government in cooperation with the International Monetary Fund” to address the losses of the county’s financial sector.
Despite their denial, both officials know that Al Shami was right. Lebanon is bankrupt, period. The current economic collapse, which had been expected since the early 2000s, is one of the worst financial crises in modern times, according to the World Bank. The economic conditions led to unprecedented restrictions on people’s withdrawal from the banks and failure of the state to pay for essential service such as power, gasoline and food and medical subsidies.
A good example of the bankruptcy is the electricity sector. Lebanon’s homes get only 3 to 4 hours of electricity a day. A report by local media on Wednesday said next month’s election may be delayed because the state’s power company cannot guarantee an uninterrupted electricity in the voting and counting centers!
The entire country seems in a state of denial, just as Al Shami said. The economic conditions will thus only get worse. The Lebanese people know exactly what is wrong with their country and the remedy- a corrupt political class that is allied with a foreign backed armed groups. If they can secure enough electricity, the May election is Lebanon’s opportunity to turn things around.
