The world has allowed the Lebanese economy to collapse – and the telecoms industry is next – the Organization for World Peace

The Lebanese government recently announced that it will calculate telecom tariffs based on a much weaker floating exchange rate, making prices up to four times more expensive, according to digital rights group SMEX. The price increase will unequally affect Lebanon’s estimated 250,000 migrant workers, who barely earn enough to survive, let alone send them back to their families. These workers must now limit their connections home and to future employment.

This isn’t the first time telecom prices have sparked outrage in Lebanon. In the years leading up to 2016, the country ran out of options to rebuild its economy. Political divisions in the Middle East slowed remittances from millions of Lebanese migrant workers. At the same time, the Sunni Muslim Gulf countries stopped providing financial support to Lebanon as the influence of Hezbollah, a heavily armed Lebanese Shia political group, grew. A solution to the mounting national debt came from Lebanon’s central bank, the Banque du Liban, which in 2016 introduced “financial engineering” — mechanisms that offered banks immense returns on new dollars.

The system could have been successful in the long term if reforms had quickly followed, but these never came. Instead, dollar inflows into foreign exchange reserves received a much-needed boost, followed shortly by an increase in liabilities. According to some reports, the central bank’s debt exceeded its assets.

Meanwhile, the cost of collecting Lebanon’s debt accounted for at least a third of budget spending.

In order to improve government revenue, politicians launched a plan to tax WhatsApp calls in 2019. Like the recent price increase, this tax unfairly impacted poor people, despite an already low tax system skewed in favor of the rich. The tax was the last straw for the burdened Lebanese population, and the economic crisis erupted into political unrest as young and aging militia leaders organized mass protests.

Soon after, foreign exchange trading dried up, banks were unable to pay their depositors and closed, and the government eventually defaulted on its foreign debt. These events were followed by the 2020 Beirut port explosion, the COVID-19 pandemic, and other humanitarian, economic, and political crises that exacerbated an already apocalyptic situation.

At one point the debt rose to 150% of Lebanese production. Power plants cannot deliver electricity 24 hours a day, and Lebanon’s only reliable export is human capital. The World Bank’s Spring 2021 Lebanon Economic Monitor found that Lebanon’s GDP fell from around US$52 billion in 2019 to a projected US$21.8 billion in 2021, a 58.1% decline equals – the sharpest decline in 193 countries this year. According to estimates, government revenues would almost halve in 2021, reaching 6.6% of GDP, the third lowest rate in the world. An estimated 75% of the population struggles for food. The World Bank estimates that the disaster in Lebanon is among the top ten, possibly top three, of the worst crises in the world since the mid-19th century.

These facts speak for themselves: the international and national responses to the Lebanon crisis have failed.

“Deliberate denial during a willful depression leaves long-lasting scars on business and society. More than two years after the financial crisis, Lebanon has yet to find, let alone embark on, a credible path to economic and financial recovery,” said Saroj Kumar Jha, World Bank Mashreq Regional Director. “The government of Lebanon must urgently move forward with the adoption of a credible, comprehensive and equitable macro-financial stabilization and recovery plan and accelerate its implementation if it is to avoid a complete destruction of its social and economic networks and to stop immediately irreversible losses of human capital.”

The World Bank has developed a strategy for the recovery of the Lebanese economy, with a particular focus on the country’s immediate and short-term needs. This approach makes Lebanon’s inability to repay debt and its lack of foreign exchange reserves the country’s key problems, meaning international aid and private investment will be essential to the recovery.

The structure for Lebanon to receive aid is in place; In 2020, the World Bank Group, the European Union and the United Nations established the Framework for Reform, Reconstruction and Reconstruction (3RF) to address Lebanon’s near-term needs. Part of that effort included the creation of the Lebanon Finance Facility to “pool grant resources and increase funding coherence and coordination.” However, these initiatives have achieved nothing worth mentioning. Any road to Lebanon’s recovery will require long-term, direct financial assistance, but without sweeping reforms from within, it is unlikely to be forthcoming.

France is leading the international community’s response to Lebanon by urging the nation to fight corruption and enact reforms to attract donors. The International Monetary Fund has also followed suit, urging the Lebanese authorities to “carry out several crucial reforms ahead of the IMF Board meeting” when it met with them earlier this year to discuss the transfer of bailout funds.

Until recently, Hezbollah led the Lebanese resistance to reform. But after this year’s elections in May, Lebanese voters elected 13 independent candidates from the Swing Opposition movement, ending Hezbollah’s parliamentary majority. Internal divisions are likely to complicate the work of these independent candidates, but any change within the government means greater opportunity for reform.

Another aspect of the World Bank’s strategy for Lebanon concerns a debt restructuring program. However, this would require a functional understanding of this debt. Before anyone can end the economic crisis, politicians and bankers must agree on the exact amount of Lebanon’s debt. Without knowing the exact amount of debt to be collected, it is impossible to develop an effective financial strategy.

Other elements of the World Bank plan include restructuring the financial sector to allow banks to repay their debts, a new monetary policy aimed at restoring the exchange rate, reducing the government’s budget deficit, and improving social welfare, particularly welfare for the poor and vulnerable Households . The plan identifies the electricity sector as a particularly vulnerable area that needs immediate assistance, so recovery efforts should focus support there.

The World Bank’s plan is promising, but more organized efforts and approaches need to be developed within Lebanon. Most plans for Lebanon come from international sources such as the World Bank and the United States Institute of Peace. For example, the Middle East Institute, a Washington, DC-based non-profit think tank, argues that US diplomacy “is aimed at the formation of a [Lebanese] government that can put aside sectarian partisanship and begin to face Lebanon’s massive challenges.” While a government of this type would be incredibly beneficial for Lebanon to achieve much-needed political reforms, the impetus for that government should come from the Lebanese come from the people themselves, not from the US government.

While plans like these are drawn up by some of the world’s top economists, the needs of the Lebanese people themselves should always come first. This is not to say that it is Lebanon’s fault that it has been too passive so far; Rather, the current catastrophe is the fault of the political and business elite and has occurred despite the opposition of the Lebanese people.

The people of Lebanon must continue to stand up to officials who consistently ignore and even contribute to their suffering. The election of the 13 independent candidates was a promising start, but must be accompanied by the election of an effective candidate in the upcoming presidential election later this year. Lebanese citizens may not have the right to directly elect their president themselves, but they can influence the results by supporting and/or opposing candidates. With enough organized action by the Lebanese people and pressure from potential international donors, the government can be persuaded to implement reforms.

The Lebanese economy needs to be revitalized. Every week that goes by without this crisis ending is another week of injustice that must be restored.