On a sunny afternoon in mid-June, several hundred students and lecturers from the Lebanese University, in Beirut, gathered in a square outside the Prime Minister’s office. Some stood on top of a pickup truck loaded with loudspeakers, leading chants against proposed government budget cuts to the university. “We want to continue our year and we worry about having our lessons,” a biochemistry student named Claudia Khalil told me. Professors at the university had been on strike for weeks demanding an increase in pay. In May, retired members of the military burned tires and demonstrated in the same square against proposed cuts to their pensions and benefits. “Thieves, thieves!” they shouted at the old Ottoman building.
Lebanon’s profound economic dysfunction is coming to a head this summer, as its political leaders try to impose austerity measures on a restive public, while failing to enact anti-corruption measures that France, the World Bank, and the country’s other primary foreign donors insist on to reform a political system renowned for its graft and dysfunction. Lebanon ranks a hundred and thirty-eighth out of a hundred and eighty nations in the 2018 Corruption Perceptions Index, released by the global anti-corruption group Transparency International. Nearly thirty years after the country’s civil war ended, its people still endure rolling power blackouts owing to corruption and inefficiency in the country’s state-dominated power company.
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In May, 2018, the country held its first parliamentary elections since 2009, raising public hopes of more effective governance. So far, the results have disappointed many Lebanese. It took nine months of political fighting and deadlock before a government could be formed, in January, with Saad Hariri as Prime Minister. The Sunni leader, however, was left weakened, losing a third of his party’s seats, while Hezbollah, an Iranian-backed Shiite political party and militant group, made major gains.
This week, the Lebanese parliament’s finance committee approved a draft budget that analysts dismissed as riddled with economic half-measures—some tax increases and spending cuts. The draft budget, which should have been approved six months ago, is expected to be voted on by the full parliament next week. The budget could spark further public protests as Lebanon’s four and a half million people struggle with a tepid economic growth rate of one per cent, rising cost of living, and barely functional public services. At the same time, more than a million Syrian refugees are living in the country, placing further strain on the economy.
According to the Beirut-based research consultancy firm Information International, eighty-five per cent of Lebanese citizens don’t trust their politicians. Tarek Serhan, a student activist, told me that the new tax increases will fuel further civil unrest against the country’s ruling élite. He predicted a summer of protests. “The normal people, let’s say, like, the students, the waiters, the bartenders, even the small businesses will be affected” by the taxes, he said.
Today Lebanon is the third-most indebted country in the world, with around forty per cent of its annual government revenue going toward servicing debt. At the same time, there are growing concerns that the Lebanese currency, the lira, is at risk of devaluation. In January, the ratings agency Moody’s downgraded Lebanon’s credit rating to junk status, on fears that the country could default on its debts.
Government officials told me that the passage of a budget was a reason for cautious optimism. They said it would give the country an opportunity to receive a better credit-rating assessment in August. “I think we want Lebanon and the government of Lebanon to send as positive [a] message as possible,” one senior official at the central bank, who did not wish to be named because he was not authorized to talk to the media, said. “The budget and the budget deficit—will it witness a decrease?”
Last year, France hosted a meeting of international donors designed to bolster Lebanon’s economy in the wake of the war in Syria. The International Monetary Fund, the World Bank, and several nations pledged eleven billion dollars in soft loans, money that the country desperately needs to avoid financial collapse in the future. Donors, however, have not released the money, because Lebanon’s government has not met their conditions—including reducing the country’s vast budget deficit of eleven per cent of G.D.P. to 7.5 per cent, and enacting major economic reforms.
The proposed 2019 budget now being considered by parliament includes some spending cuts, but it primarily consists of freezes and an increase in taxes to raise government revenue, such as increasing the taxes on interest earned on bank deposits, from seven per cent to ten per cent. Analysts say the government half-measures will only exacerbate the country’s economic problems. “This will deepen the problem,” Sami Nader, a financial and political analyst and the director of the Beirut-based Levant Institute for Strategic Affairs, said. Nader said that Lebanon’s ruling élites appear to be betting that European powers do not want to see the country’s economy collapse because it could result in a new wave of Syrian migrants heading toward them. “They think that all the world will be on its knees begging us to take whatever we want but in exchange we will keep the refugees,” he said. “It’s not like that. No one is begging us.”
After the civil war, which was fought from 1975 to 1990, Lebanon’s political and religious factions agreed to a complex power-sharing agreement that divided government power along sectarian lines. Since then, political deadlock has regularly ensued, with the country’s parties and sects fighting for control of positions, policy, and lucrative government contracts. Lebanon’s political divisions have crippled the country’s economy, with graft and sectarianism working in tandem to fuel the current economic crisis. Nader, the analyst, told me that state institutions, rather than being viewed as providing important services to Lebanese citizens and the country, are divided up between powerful politicians as sources of income. “Here every single procurement contract is a way to finance political parties,” Nader said. “You have electricity that is under the control of one party, the waste management under the control of another party, the port authority under the control of a third party.”
The result of such vast corruption is that government-owned companies that should provide public services rarely do so effectively. Instead, they eat into the state budget and push the government deeper into debt. The state power company Electricité du Liban is among the worst offenders. Each year, it receives at least $1.5 billion in financial support from the government. Despite that vast expenditure, Lebanon has not regained twenty-four-hour electricity since its civil war ended. To avoid blackouts, residents pay high prices for power produced by a network of privately owned neighborhood generators. Above Beirut’s streets, a jerry-rigged, tangled mess of heavy black cables connects hundreds of thousands of apartments to generators.
In April, the parliament passed sweeping legislation designed to reform the power sector, including the building of new power plants and the provision of twenty-four-hour electricity by 2020. The measure was the type of reform demanded by the donors who gathered in Paris last year. In June, Lebanon’s constitutional court struck down a major part of the law after several members of parliament filed a lawsuit questioning the fairness of the issuing of contracts to build new power plants. The ruling stalled the power-sector-reform effort. Nader, the analyst, said that corrupt politicians were blocking reform across the economy. “Why would they privatize the electricity if they are getting their money from the electricity?” he asked. “Why would they open the sector of telecom to competition if they are financing their parties, if they are employing their people?”
Even trash disposal hasn’t escaped political payola. In 2015, Beirut’s landfill had well surpassed its capacity for garbage. Despite years of warnings, neither the government nor the state-contracted company, Sukleen, had developed an alternative site. At the same time, Sukleen’s garbage-collection contract ended. As politicians fought over who would get the next contract and how much it would be worth, piles of rotting garbage accumulated underneath bridges and in carparks. Residents of densely populated neighborhoods in Beirut burned their garbage, and tons of refuse was illegally dumped in rivers, valleys, and the Mediterranean Sea. The owners of Sukleen are close allies to Prime Minister Hariri’s family. Thousands of protesters staged angry demonstrations in Beirut, organized under the banner “You Stink,” to show their anger at politicians whom they blamed for creating the crisis. It was a rare moment of unity in a deeply divided society, showing that anger at the country’s ruling élites cut through its religious divisions.
Lebanese politicians and political parties operate vast patronage networks that provide government jobs to party loyalists. The result is a bloated civil service. There are an estimated four hundred thousand civil servants in Lebanon, so roughly a tenth of the population receives a government salary. The state-owned railway continues to fund an office of several dozen staffers, even though it hasn’t had a functioning railway in decades. Government salaries and pensions account for thirty-five per cent of the state’s total budget. Before the 2018 parliamentary elections, the public sector was promised a pay raise—a popular move among voters, but not a financially viable one. Now those same government workers are protesting over the potential cuts to their wages that donors say are needed to stabilize the economy.
Hariri has warned that “painful” austerity will be needed if Lebanon is to avoid “catastrophe.” But persuading the international donor community that real change is finally taking place will be difficult. Getting the population to shoulder the cost of decades of economic mismanagement will be an even harder sell, after decades of postwar corruption and graft. Serhan, the student activist, told me that Lebanon’s leaders are to blame, not its people. “They are the ruling authority and they have been ruling this country for tens of years,” he said. “They put us in this trouble, not us.”