Speaking before the parliamentary committee on La Défense, the French deputy Gwendal Rouillard described the current catastrophic situation in Lebanon, a situation already explosive with the demonstrations of October 2019 and which worsened further with the explosion of August 4, 2020, a country characterized by the negligence of its political class, corruption and the grip of Hezbollah.
The health crisis and the « systemic » financial crisis reflect the end of an economic model based on the attraction of capital, rent and the stability of the pound, notes Gwendal Rouillard.
« Since the situation worsens, the pound has lost 100% of its value in less than 2 years », notes the deputy, who continues with a catastrophic description, 50% of the population living below the poverty line, the collapse of services essential to the population such as health services, electricity and even water supply, almost impossible in the whole country.
« The situation is such that more and more Lebanese can no longer feed themselves, including at the level of the Lebanese army and internal forces », underlines the French parliamentarian.
Gwendal Rouillard recalled that France mobilized the international community with the organization of 2 international conferences, one of which raised more than 205 million euros and made it possible to put in place urgent aid.
However, aid such as CEDRE and ROME II remain blocked pending a new government and structural reforms deemed essential due to the inability of the political class to proceed.
Lebanon, a failed state?
The parliamentarian noted that Lebanon cannot yet be considered as a failed state, 2 institutions still hold, namely the Lebanese army and the internal security forces. However, they could soon collapse due to desertions.
As such, an international conference was organized by France to support them.
« The situation is the fruit of a decade of renunciation of its political class and the symptom of the evil which undermines this country, its confessional logic »
Gwendal Rouillard, July 8, 2021
It is therefore a matter of promoting the feeling of common belonging and of citizenship, « an aspiration of many Lebanese who wish to build a new Lebanon within the framework of a political transition ».
Gwendal Rouillard thus welcomes the initiatives taken by civil society against political parties. It will therefore be up to France and its partners to guarantee the holding of legislative, municipal and presidential elections on time.
In addition, an international humanitarian taskforce under the aegis of the United Nations and the World Bank is recommended to respond to the current emergencies of the population in the face of drug shortages and allow development and access to water and sanitation. ‘electricity.
France tries to stabilize Lebanon in the face of the crisis it is going through
Lebanon is now faced with several crises, economic crisis, crisis linked to the coronavirus, and now crisis linked to the explosion of the port of Beirut, to which is now added a political crisis due to the resignation of the Hassan Diab government .
The Land of Cedars has been without government since August 10.
For the time being, the release of international aid is conditional on the outcome of the negotiations undertaken with the IMF, which requires that the necessary reforms be put in place, particularly economic and monetary reforms. Indeed, many sources or personalities involved in the case multiply the declarations indicating that the international community will not grant « no blank check to Lebanon », following the non-respect by Beirut of its promises and its commitment to carry out. the reforms necessary for economic recovery already at the Paris I, II and III conferences in the 2000s.
The banking sector crisis, although masked by the financial engineering operations carried out by the Banque du Liban, had started much earlier, despite the colossal profits announced by Lebanese banks until last year. In reality, the Banque du Liban thus repaid nearly 16 billion dollars between 2016 and 2018, thus emptying a large part of its monetary reserves in favor of banking establishments.
On the economic front, the crisis that began in 2018 came to light in the summer of 2019 with a shortage of foreign currency, which is nevertheless necessary for the purchase of basic necessities in particular. However, a reversal of financial flows had been observed as early as January 2019. This crisis was then accentuated following the unilateral imposition by Lebanese banks of capital controls, thus blocking access to accounts.
After the resignation of former Prime Minister Saad Hariri on October 29, 2019, a new government chaired by his successor Hassan Diab was formed on January 17, 2020. As early as March, the Lebanese authorities announced a state of default on maturing Eurobonds. In addition, Lebanon has opened negotiations with the IMF with a view to obtaining economic aid of the expected amount of 10 billion dollars.
However, the negotiations, now suspended, quickly stumbled over the capacity of the Lebanese authorities to carry out the reforms necessary for the release of international aid as well as on the issue of quantifying the losses of the financial sector. The Lebanese authorities estimate that its losses would reach 241 trillion Lebanese pounds on the basis of an exchange rate of 3600 LL / USD. , that is to say approximately 80 billion dollars, which the local banks refuse via the association of the banks of Lebanon or the Bank of Lebanon itself.
Some sources are now citing losses for the financial sector exceeding $ 100 billion, estimating that Lebanon would now require a stimulus package of 63 billion dollars but only 26 billion at most are available . According to these same sources, all Lebanese banks are now insolvent.
The economic situation has further deteriorated with the deterioration in the value of the Lebanese pound and the implementation of different exchange rates: official exchange rate at 1507 LL / USD, the so-called market exchange rate. for stockbrokers or even certain companies fixed by the Bank of Lebanon, today at 3,900 LL / USD and the exchange rate on the black market, which has fluctuated until reaching 19,000 LL / USD, recently, representing a 92% loss from its price 2 years ago.
Finally, the explosion of the port of Beirut , which also ravaged much of the Lebanese capital, further aggravated the situation, with damage estimated at between $ 10 billion and $ 15 billion.
For the time being, some experts familiar with the matter note with concern that politico-economic interests are more important for certain parties than the general interest in benefiting from economic aid in the face of the crisis, to the point of estimating that traditional divisions political parties have faded from parliament in favor of the banking party and others.
Also, some of these interests would even have gone so far as to threaten a civil war if the reforms demanded by the international community were carried out. However, it remains firm on this matter.
During his trip to Lebanon on the occasion of the centenary of the proclamation of the state of Greater Lebanon, on September 1, 2020, the day after the appointment of Mustafa Adib as prime minister , the President of the French Republic would thus have handed over to the Lebanese leaders, a roadmap for the implementation of the economic reforms deemed necessary and first, a diagnosis of the losses of the Banque du Liban. This roadmap also provided for the establishment within two weeks of a government capable of carrying out these reforms. However, 15 days later, following the expiry of the allotted time, the Lebanese authorities seem to have failed to set up a new cabinet, notably following the announcement by Washington of economic sanctions targeting Ali Hassan Khalil, arms- right of Nabih Berri and former Minister of Finance, the other political parties having accepted the principle of rotation of sovereign ministerial portfolios, namely defense, interior, foreign affairs and finance.
The local authorities have since tried to delay the end of the subsidy program by adopting, in particular, a fuel subsidy plan based on a parity rate of LL / USD 3,900 instead of the official rate that had been used until now, i.e. at 1500 LL / USD. This new rate should thus increase the price of a 20-liter can of fuel by a third and induce a new inflationary surge.
On the parity side of the Lebanese pound, this new inflationary surge was accompanied by another measure from the Bank of Lebanon. This, in the context of circular 158, would like depositors of commercial banks to be able to withdraw up to USD 400 cash from their accounts blocked since the introduction of informal capital controls in November 2019. However, a number of them have already indicated, unofficially, that they cannot afford such a measure. Others would have bought large quantities of foreign currencies on the local market, leading to an additional deterioration of the Lebanese pound which reached a new historic low, this Saturday, June 26, with a parity rate of 18,000 at the end. afternoon.