Lebanon’s new government, led by President Aoun and Prime Minister Salam, must tackle a dire economic collapse marked by a significant banking deficit and currency devaluation. Key reforms including independent audits, anti-money laundering measures, and the elimination of sectarian influence in financial appointments are critical for restoring trust and attracting international aid. The influence of Hezbollah presents challenges, yet changing geopolitical contexts offer opportunities for Lebanon to forge better economic ties. Immediate action and accountability are essential for a successful recovery.
Lebanon is at a crucial juncture with a new government under President Joseph Aoun and Prime Minister Nawaf Salam, tasked with reversing the ongoing economic collapse since 2019. With an $80 billion deficit in the banking sector and the national currency losing 90% of its value, reforms are critical yet have faced political obstacles. Moreover, the International Monetary Fund has indicated that Lebanon’s current reforms are insufficient for financial support, leading to an overreliance on dwindling foreign reserves.
In Salam’s inaugural speech, he committed to “rescue, reform and rebuild” the nation, emphasizing the urgency of enacting deep structural reforms. Experts like Fadi Nicholas Nassar stress that timely reforms are essential to restore lost trust, which is vital for Lebanon’s recovery. Economists, including Jassem Ajaka, insist on the necessity of transparent audits for the banking sector to ensure fair loss distribution post-crisis.
Ralph Baydoun, an analyst, highlights Lebanon’s need for robust anti-money laundering measures and an independent audit of its banking system to regain international confidence. He notes that strategic reforms must focus on enhancing core sectors like technology and services. Early signs of positive change include Salam’s promise to eliminate sectarian quotas in financial appointments, addressing governance issues.
The Lebanese banking sector is in dire need of restructuring, as depositors suffer while financial elites remain unaccountable. Adviser Mohammad Farida proposed a comprehensive roadmap to ensure small depositors recover their funds and to hold culpable parties accountable. Immediate payouts for small depositors should be prioritized, followed by larger deposits through a mix of legal actions and bail-ins.
The international context complicates Lebanon’s recovery; Hezbollah’s political influence poses significant barriers to reform and investment. Nassar argues for structural changes that dismantle such power dynamics, advocating for professional governance instead of patronage. Baydoun adds that Hezbollah’s waning strength presents an opportunity to foster better relations with Western supporters.
The humanitarian situation exacerbates the economic crisis, with over $8.5 billion damages reported from the recent Hezbollah-Israel war and a projected 10% GDP contraction. Reconstruction efforts could rely on international donors, particularly the Gulf Cooperation Council, illuminating the need for Lebanon to commit to substantial reforms.
New legislation focusing on essential reforms is the government’s foremost task, according to President Aoun. While Moody’s forecast improvements contingent on political stability, skepticism from potential investors persist, as real deliverables, not just promises, are required to restore confidence. Detractors argue that bridging political divides is necessary to attract foreign direct investment.
Finally, addressing Lebanon’s electricity sector with necessary regulatory reforms is critical for economic recovery. Experts emphasize the need for private sector involvement and a transparent governance framework to optimize the use of Lebanon’s potential gas resources. The new administration’s challenge lies in gaining parliamentary support for such reforms, vital for establishing a solid recovery plan.
Lebanon’s new government faces monumental challenges in restoring economic stability amid an ongoing crisis exacerbated by past governance failures. Essential steps include rigorous audits, transparent restructuring of the banking sector, and fostering international trust through significant reforms. The influence of Hezbollah complicates the reform landscape, but geopolitical shifts present an opening for better relations with global backers. Ultimately, accountability and clear legislative steps are crucial for rebuilding investor confidence and achieving long-term recovery.
Original Source: www.arabnews.com
