The Rafic Hariri memorial, located near the scene of the attack in Beirut. Photo credit: François el Bacha for
The Rafic Hariri memorial, located near the scene of the attack in Beirut. Photo credit: François el Bacha for

After years when the commemorations of the assassination of the former Prime Minister took place at the Place des Martyrs, then at the BIEL in Beirut, on February 14, 2005, 15 years later, it was at the Maison du Center that his heir policy has decided that the ceremony will be held.

Year after year, the Rafic Hariri myth thus seems to be reduced to a trickle, as is the scope of these commemorations.

It would be hypocritical today to write a glowing article in tribute to Rafic Hariri as some did and still do year after year. The figures and facts concerning its economic policy are enough to be convinced of this, without mentioning the political file.

And for good reason, the time is over for certain luxuries, Lebanon is in deep economic and social crisis, crises whose very pillars are to be found in the decisions taken during its mandates and which should be dismantled today. today.

From coming to power in 1993 to his fall in 1998

To come to power, insistent rumours, even from local and international officials, point to the use of economic weapons by Rafic Hariri to come to power in 1992. Thus, its banks and Bank Med in particular, took part in the attack against the Lebanese pound, whose parity against the dollar slipped until it reached its historic low, at 3,000 LL/USD. Faced with this tumble, interest rates on the pound also reached their all-time highs, up to 38%. It was then for the former prime minister to rule out possible competitors including Omar Karamé and others and to appear as the providential man capable of rebuilding Lebanon, being crowned with his status as an entrepreneur.

Quickly, the Horizon 2000 plan was presented, which provided for public investment of 10 billion at the time over a period from 1993 to 2003, the pivotal role of which fell to the Council for Reconstruction and Development (CDR). Among the main items of expenditure, 2.5 billion went to transport and 1.8 billion to public electricity and in particular the construction of new power stations was planned.
It was already mentioned that the state calls on partnerships between the public and private sectors, with the creation for example of 2 mobile telecommunications networks in the form of BOT (Built Operate Transfer) Cellis and LibanCell and another example SOLIDERE for the reconstruction of the city center, but which is also the source of many controversies that we will not discuss at this time.

Thus, it was planned to use public debt to finance this program.

On the government side, in 1991, the gross public deficit represented 49% of GDP in 1993 and will reach, after the Hariri mandate, 103% of GDP in 1997. As for the net public debt, it represented 38% of the GDP in 1993 and 97% in 1997. The GDP will increase from more than 5 billion dollars in 1992 to more than 15 billion dollars in 1997, with a high growth rate. But at what cost…
Can we already imagine that 90% of state revenues in 1997 were already absorbed by interest payments on the public debt , according to certain IMF documents?
In question, in particular, the interest rates which were used to arrive and gain power but also because of the policy of stabilization of the Lebanese pound which was undertaken in parallel by Riad Salamé, arrived in the luggage of Rafic Hariri.

By evoking the monetary policy, at the same time, this policy of high rates discouraging private investment. It was therefore more interesting to keep your money in the bank than to invest in the real economy. Likewise, the banking culture will change.

To long-term projects, banks prefer projects whose return on investment is shorter and more profitable.
Through the choices made during the Horizon 2000 plan, the banking sector will thus develop, the construction sector since it takes 2 years to construct a building and tourism, with banking establishments requiring a return on investment in less than a year. . But it also destroyed the few industries that had managed to survive the civil war and dismantled the agricultural sector among others.

This will obviously worsen Lebanon’s trade balance even if the balance of payments will remain positive due to the investment of the diaspora which had been held back during the 15 years of previous conflicts and obviously the interest rates. To stimulate this inflow of capital, at the same time, a policy of maintaining parity will be decided. This is precisely the factor that prevented the symptoms of a deep crisis from appearing at the time.

The Salim Hoss Interlude

Yet at the time, the crisis could have been avoided, especially between 1998 and 2000, when the first signs of a situation that was getting out of control appeared. This is how the Salim Hoss government, with Georges Corm at the Ministry of Finance, tried to implement an austerity policy and thus restore public accounts.

Noting these slippages, his successor, Salim Hoss who is an economist, will therefore decide to introduce a policy aimed at stabilizing the public debt and breaking this dynamic of indebtedness which could quickly become uncontrollable. In 1998, as part of the budget of the time, measures concerning both expenditure and public revenue were put in place. Also, faced with a significant internal public debt at high interest rates, recourse to external borrowing in Lebanon in dollars but at lower interest rates was decided.
These 2 measures were aimed at reducing the budget deficit to 15% in 1998 against a 26% deficit in 1997. However, these decisions will harm economic growth which will collapse.

On return to power, Rafic Hariri observes and calls for help from the international community

Returning to power between 2000 and 2004, the budget deficit and public debt reached unbearable levels and the economy sank into a slump, according to Rafic Hariri.

The budget deficit had been reduced by the policy of the previous government, that of Hoss, the income of the state being higher than the public expenditure but the public debt which was 30 billion dollars continued to believe because of the interest rates which absorbed 80% of state revenues, the Lebanese debt issued during the Hariri mandate between 1993 and 1998 extending over relatively long periods and impossible to renegotiate until maturity.

The Prime Minister will use his address book to organize the conferences Paris I in 2001 and Paris II in 2002 for which he hoped to obtain 3 billion dollars but for which he will obtain 4.4 billion dollars. Lebanon will undertake to carry out a series of economic, fiscal and monetary reforms, in an attempt to restore financial and budgetary balance.

Already at that time, and more particularly in the 30-page document presented by the Lebanese government within the framework of Paris II, mention was made of privatization measures, in particular of the public electricity sector, against international aid which was not matched guarantees such as the 2018 CEDRE program or even a reduction in interest rates which were 14% at the time and structural and institutional reforms, of the same nature as those we are still talking about today. He therefore requested loans at reduced rates aimed at reviving economic growth as in 2018 during CEDRE.

The international community was already worried about Lebanon, because of a large debt, which impacted the social and economic situation, and therefore capable of shaking the Land of Cedars.

It was therefore planned, on paper, that Lebanon, benefiting from this program, could carry out a financial recovery, a reduction by half of the service of the public debt and the public debt and even a rebalancing of the budget in 2005. To finance this rebalancing, the state will accentuate a policy of abandoning entire economic sectors for the benefit of the private sector and in particular the banking sector, which will continue to develop to its detriment.

Obviously, this did not go as planned, the public and budgetary deficits continued to deteriorate, further aggravated by the political crises and regional circumstances, the promises of privatization, reforms and restructuring were not kept and so continued during his tenure.

And at the same time, the development of the banking sector, the construction sector etc… will participate in the increase of his personal fortune which would go from 3 billion dollars in 1992 to 16 billion dollars at his death, but that is another story. …

Rafic Hariri’s mistakes

If we exclude cases of embezzlement, Rafic Hariri’s mistake was not to use debt to rebuild and stimulate the economy but to have a debt whose service is more important than the return on investment. . It has thus granted the private sectors entire profitable economic sectors to the detriment of public revenues. Thus, the tax structure has led to the fact that today 70% of income is of tax origin, one of the highest rates in the world, and this has unbalanced the public accounts, as evidenced today by the continuation of major budget deficits.

Similarly, his second mistake was to want to plan an economy based on construction, cyclical in nature and tourism in an unstable geopolitical environment like that of Lebanon or that of its region. These are sources of income that are not of a sustainable and guaranteed nature.

The third mistake was the one made within the framework of the monetary policy with high interest rates and a policy of maintaining the parity further increasing the difference between the real value of the Lebanese pound and its parity against the dollar.

But obviously, the main error was that of not respecting the commitments made by Lebanon, that is to say the strict application of the program of reforms presented during these conferences for various causes, just as it is undeniable that its successors also bear some responsibility.

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