Lebanon will not get bailout, says US diplomat

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Lebanon’s economic situation faces an “immediate catastrophe,” according to a senior US diplomat, who said the country’s leaders must demonstrate their commitment to reform before foreign aid can take place.

David Hale, who most recently served as Under Secretary of State for Political Affairs and is now stationed at the Wilson Center Political Institute’s State Department, said Lebanon’s collapse was imminent.

“There won’t be an international bailout, but there will be substantial aid for a reform program,” Hale told CNBC’s Hadley Gamble on Wednesday.

Twenty months after the start of Lebanon’s political and economic crisis, the country still remains at a political stalemate.

Triple Prime Minister Saad Hariri, appointed Prime Minister designate in October, failed to form a new government that would enact the reforms needed to unlock crucial international aid.

Acting Prime Minister Hassan Diab resigned following the August 4 explosion in Beirut. He now rules with limited authority.

“The key to opening the door is in the hands of the Lebanese leaders, they must demonstrate to us that they have the will and the capacity to undertake the necessary reforms so that all international funding is not wasted, as has been the case. in the past, ”Hale said, adding that the Lebanese should not expect“ external salvation ”.

The French government has started to impose entry restrictions on Lebanese officials, hampering political progress. Former Lebanese Economy Minister Nasser Saidi told CNBC this week that the only language Lebanese politicians would understand is “personal sanctions on their own assets.”

The US Treasury also sanctioned Lebanese officials with links to Hezbollah. Hezbollah, which operates as both a political party and a paramilitary group and is designated by the United States as a terrorist organization, recorded record gains in the Lebanese elections of May 2018. It is widely regarded as the political group the most powerful in Lebanon.

Since its inception, the Iranian-backed group has focused on eliminating Israeli and Western influence in the Middle East.

A woman holds a banner showing the names of the victims of the Beirut explosion during a protest near the port on August 11, 2020 in Beirut, Lebanon. Last week’s explosion, which killed more than 200 people and injured thousands more, is seen by many Lebanese as a deadly manifestation of government malfeasance.

STR | NurPhoto via Getty Images

Main crises in the world

The World Bank said earlier this month that Lebanon’s financial and economic crisis would likely rank among the three most severe crises in the world since the mid-19th century.

The Lebanese pound hit new lows over the weekend, with the black market rate trading at 18,000 lire to the US dollar. The currency has lost over 90% of its value since 2019.

More than half of the country’s population is living below the poverty line, and many humanitarian organizations, once focused on the country’s 1.5 million Syrian refugees, have redirected their resources to help the poor local population of Lebanon.

Lebanon’s GDP has grown from nearly $ 55 billion in 2018 to around $ 33 billion in 2020, and the World Bank predicts that the economy is expected to contract further by 9.5 percent in 2021.

A fuel crisis has plunged much of Lebanon into darkness, reducing the number of hours that generators can provide back-up electricity.

The chronic shortage of electricity in the country is not new, but the fuel shortage, linked to Lebanon’s inability to pay its debts, has compounded the country’s difficulties. The government has raised fuel prices by more than 30% this week in an attempt to alleviate the crisis.

Hezbollah chief Sayyed Hassan Nasrallah said last month that Iran could supply the country with fuel in local currency, prompting a backlash.

Emboldened Hezbollah

Former President Donald Trump’s maximum pressure campaign was aimed at significantly disrupting the flow of funds from Iran to Hezbollah. As outgoing President Joe Biden aims to join the Iran nuclear deal (known as the Joint Comprehensive Plan of Action) and lift sanctions against the Islamic Republic, more money is expected to flow to the Iranian proxies. ‘Iran.

State Department estimates from 2019 put Iran’s cash flow for the group at $ 700 million per year before 2018.

“Hezbollah had the resources it needed before the JCPOA, during and after. It is an incredibly resilient organization,” Hale told CNBC.

Meanwhile, Israeli Foreign Minister Yair Lapid told CNBC’s Hadley Gamble during his visit to the United Arab Emirates this week that “Lebanon was a country with a terrorist organization, now it is a terrorist organization. with a country, which is alarming “.

Lapid’s comments came just a day after leaders of Hezbollah and Hamas met on Tuesday in Beirut, the capital of Lebanon, to discuss Gaza.

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