One of Lebanon’s most seasoned politicians said on Wednesday the financial meltdown underway in the small but geopolitically pivotal country could lead to an impending “hunger revolt”.
Druze leader Walid Joumblatt cautioned against over blaming the banking system for the crisis, saying the edge Lebanon has had for the last seven decades as an economic and business hub could be eroded for good.
Lebanon’s currency, the lira, began plummeting in October-November last year. The monetary authorities imposed capital controls to try and preserve the dollars left in the banking system as almost three decades of public debt accumulation all but brought the system down.
The lira is trading at 4,250 to the dollar, compared with 1,500 liras to the greenback at the beginning of the crisis.
“The hunger revolt will come and we have no answer,” Mr Joumblatt said.
“It started. Every chief of tribe, every chief of community is trying to satisfy his own people,” Mr Joumblatt told a panel organised by the Beirut Institute via Zoom from Al Mukhtara Palace, his ancestral home in the Chouf Mountains.
The tall, gaunt, Mr Joumblatt is a student of history and a former warlord in the Lebanese fratricide of 1975-1990. He is widely regarded, even by his foes, as an astute reader of regional and international politics.
Although Mr Joumblatt supported the Palestinian cause, he dealt in the 1980s with former Israeli Prime Minister Ariel Sharon when Sharon was an army officer, and later placated Hezbollah, in complex political manoeuvres to shield his small sect from threats he viewed as terminal.
He survived last year an attempt by Hezbollah to shove him off a political scene he has been a player in since Syrian regime agents killed his father, the statesman Kamal Joumblatt in 1977.
Hezbollah’s rough tactics could have led to the possible incarceration of Mr Joumblatt, or dealt him physical harm.
Mr Joumblatt summoned the last drop of his political acumen, and the services of an old friend, Shiite Speaker of Parliament Nabih Berri, who made a rare break with Hezbollah for the sake of Mr Joumblatt.
But Lebanon’s political class mostly coalesced to contain demonstrations that bore out in October last year demanding the downfall of all the actors in charge and end of the system of spoils enshrined in the 1989 Taif Agreement, that contributed to halting the civil war a year later.
A crackdown by the authorities supported by Hezbollah contributed to bringing in a government strongly allied with the Iran-backed Shiite group in January.
Mr Joumblatt described the government’s efforts to seek aid from international financial instructions as “theoretical”.
“The solution is major political and economic reform that is difficult nowadays,” he said.
Using an expletive, Mr Joumblatt dismissed with disdain what he described as unrealistic scenarios marketed by some officials in the Hezbollah-aligned government of its ability to secure a $20 billion rescue package.
The money is supposed to come from the International Monetary Fund, as well as a group of donor countries that pledged $11 billion in aid to Lebanon in Paris in 2018 but did not send any substantial funds because the flows were contingent on reform.
“Now because of the coronavirus you have so many nations pledging for IMF aid and the IMF is putting conditions,” Mr Joumblatt said.
“We have to apply these conditions and reforms. It will take time and time is running out,” he said.
One of the first actions of the new government was to launch an unprecedented attack on the central bank, accusing the governor Riyadh Salameh and the country’s banks of conspiring to empty state coffers.
Mr Salameh responded by saying he has repeatedly warned successive governments that accumulation of the public debt was unsustainable and the central bank did its job by maintaining liquidity.
The banking system has underpinned Lebanon’s economy since the late Lebanese statesman Raymond Edde pioneered its development in the mid 1950s through a law that enshrined banking secrecy, making Lebanon the Middle East’s deposit box.
Mr Joumblatt said tampering with the banks could lead to a deeper economic demise similar to the ruin of Syria’s economy when the Baath Party took power in a coup almost six decades ago.
“You have people inside and outside the government who would like to nationalise the banks, to destroy the banks, like in 1963 when the Baath Party abolished everything,” he said.
