Posted by: sean | August 29, 2009

The nature of the republic

Banana_republicNothing much seems to work in Lebanon. Electricity cuts are 3 hours a day in Beirut proper, about 12 hours a day in much of Dahiyeh, and so on for the rest of the country. The government ran a $2 billion deficit just last year, which is 4.5% of the country’s GDP. According to the Finance Minister, we’ll probably be up to a public debt of $52 billion, or 165% of GDP, by the end of the year.

In the meantime, there isn’t even a government nearly three months after the elections due to intra- and inter-coalition squabbling:

But Mr Hariri will have to face trouble from within his own camp, as well as from the followers of former general Michel Aoun, a critical opposition figure, who is demanding control of key ministries over the objections of the majority.

Although that battle has yet to resolve itself, Mr Hariri’s allies in the Kata’eb Party, a right-wing Christian movement yesterday also announced they would suspend, but not quit, their participation in the majority alliance, nicknamed “March 14”.

Leaders of the Kata’eb have criticised Mr Hariri’s willingness to work with Mr Aoun in any way and several of its members have been particularly aggressive in stymieing progress on the new cabinet, according to one of their nominal allies.

One Christian political figure, who asked not to be named, described many of the problems as personal, as political figures harass rivals from other parties and refuse to compromise on allocation of the ministries, as well as fermenting complaints that March 14’s financial backing is not transparent. Several Kata’eb loyalists appear to be demanding answers on how the alliance is funded.

The MP Akram Shohayib, a majority supporter aligned with Mr Jumblatt, said that the internal battles in March 14 are too dangerous to discuss in public. “If I told you what happens during the meeting of the general secretariat of March 14, the country will go to chaos,” he said, before refusing further comment.

In the meantime, telephone service is still sub-par and ridiculously expensive, electricity cuts continue, roads are in terrible shape, crime is increasing, public schools are a disgrace, and public transportation a joke. All this, while what’s probably the country’s biggest cash crop is being destroyed by the government instead of taxed.

This editorial from The Daily Star, then, seems right to me:

[W]e are left with a situation that borders on the insane. Everywhere we turn, we encounter tough-talking leaders who spew chest-beating bravado, but all the while the country remains on the verge of complete bankruptcy.

… The reality is that politicians show little concern for the local problems that have such a tremendous impact on the day-to-day lives of Lebanese citizens. Hizbullah champions the need to battle the Israelis, while several March 14 factions prioritize the need to shake off Syrian influence, but nobody is talking about the need to free this country from its self-imposed shackles of mounting public debt. Most politicians instead seem content to pass along the burden of paying off billions of dollars in debt and interest to the next generation of Lebanese citizens.

Perhaps the Lebanese flag should be changed, to better reflect the nature of the republic.

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Responses

  1. The Daily Star article blames politicans, but maybe it would be more fruitful to ask how those politicans manage to win the support, or at least acceptance, of so many people. What is it about the way political power is acquired and maintained that often makes it more politically profitable for politicans to focus on “chest-beating bravado” than on solving practical problems?

  2. Perhaps the notorious postal service should’ve gotten a mention too :P. BTW, did you read this? http://www.globalpost.com/dispatch/lebanon/090619/interview-hezbollah?page=0,0

  3. According to the Finance Minister, we’ll probably be up to a public debt of $52 billion, or 165% of GDP, by the end of the year.

    But I think it used to be 180% of GDP a couple of years ago, right?

  4. Nobody..I think our ministers are busy searching for lost treasures in far away villages as mentioned in Al-akhbar the other day. The problem of numbers in Lebanon is a long and complicated one in the absence of transparency and any form of investigation or control. We are not the banana republic, we are the onion republic (layer of corruption after another) …and with no core!

  5. @Sean
    if I am not mistaken, government revenue was higher than spending if you exclude debt service. That is to say Lebanon is getting more endebted due to debt service. Interestingly also, regressive, indirect taxes (VAT) keep rising while income adjusted direct taxes (income tax, corporate tax) decline. That is to say poor people finance debt, which has been accumulated via reconstruction schemes from which they benefited little, through taxes on their, often essential, consumption.
    @Nobody
    you’re right public debt has gone down. But it is still high and getting re-financed ad nauseam through Paris I-III. However, in comparison to the GDP of it’s main creditors Lebanese debt is peanuts, especially if compared to the political dividend of having everybody (incl. Hizbullah) come and talk to you if you threaten to turn off the tap.
    @niz
    I agree on Lebanese stats, especially social ones, but would make an exception for the Central Bank and the Ministry of Finance. It is also in the nature of debt that there are at least two parties keeping accounts.

  6. Hi Karin,

    I think you’re mostly right, which explains a lot of the popular sentiment about national debt. However, while most government spending seems to have been on things like downtown, some of it was racked up for projects like the autostrade, which most people do use. I think you’re also right about the regressive taxes, although I’d be curious to see how often they’re actually paid — beyond phone bills, Spinney’s and restaurants, I’m not sure how often I actually pay the VAT, and I can imagine more “informal” businesses don’t bother with it at all. I’d also be surprised if most of the VAT revenues actually ever make it back to the state.

    But I’d like to see more progressive taxes on the well-off and a better allocation of public funds in general.

    Won: Actually, the couple of times I’ve actually used the postal service, I haven’t had any major complaints. The main problem, to my mind, is the lack of street names and house numbers. A problem that would be easy enough to remedy with a little initiative from the state. Hell, they could even make money by offering to let the Lebanese pay extra to get the street number they want provided that they follow some sort of order…

  7. By: Karin on August

    @Nobody
    you’re right public debt has gone down. But it is still high and getting re-financed ad nauseam through Paris I-III. However, in comparison to the GDP of it’s main creditors Lebanese debt is peanuts, especially if compared to the political dividend of having everybody (incl. Hizbullah) come and talk to you if you threaten to turn off the tap.

    I think I missed your point completely. You mean your government is deliberately keeping the debt ratio so high to let Paris I-III to have the leverage over Hezbollah? Or the main creditors are tempting the Lebanese government with cheap loans to get leverage over everybody in Lebanon?

    I also don’t understand what you are trying to say when you say that the debt ratio is still high and is getting refinanced by Paris I-III. Naturally the dent has to be refinanced. The last time I checked, it was two years ago and the debt ratio was 180%. To get it down to 165% in two years is quite an impressive feat. How much good should be considered good enough?


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