As Cabinet formation continues to stall, economy spirals

The Sunni opposition, backed by Speaker Nabih Berri and Hezbollah leader Hassan Nasrallah, are now demanding to be represented in the upcoming Cabinet.
by Georgi Azar

31 October 2018 | 16:12

Source: by Annahar

  • by Georgi Azar
  • Source: Annahar
  • Last update: 31 October 2018 | 16:12

A file photo of Lebanon's Parliament (AP)

BEIRUT: As both local and regional experts continue to sound alarm bells over Lebanon’s dire economic state and the need to form a new Cabinet, Lebanese lawmakers have returned to wrangling over the allocation of ministries and the size of their individual shares.

The Lebanese Forces ceding ground earlier this week and capitulating to the demands of the Free Patriotic Movement breathed life into hopes of a swift Cabinet formation, yet the emergence of a new obstacle has essentially brought back the main players to the negotiating table.

March 8-affiliated Sunni MPs, backed by Speaker Nabih Berri and Hezbollah leader Hassan Nasrallah, are now demanding to be represented in the upcoming Cabinet.

With both Shiite leaders throwing their weight behind the 6 MP-strong coalition, the pro-Hezbollah Sunni bloc is now poised to join the Cabinet, despite Hariri’s utter refusal to cede one minister on their behalf.

With the emergence of this latest stumbling block, the pro-Hezbollah Sunni bloc has continued distancing itself from blame for the latest setback.

In an interview Wednesday, MP Walid Sukkarieh maintained his willingness to form a new Cabinet “as quickly as possible,” casting aside “responsibility for the formation delay.”

Both Nasrallah and Berri have also refused to hand in the names of their proposed ministers thus far, in an attempt to further pile pressure on Hariri who’s hinted at the possibility of stepping down as Prime Minister-designate.

Hariri found himself in this predicament after suffering a devastating loss during the May 6 parliamentary elections, capturing a mere 17 MPs across Lebanon's districts, down from 27 nine years ago. 

This latest development prompted President Michel Aoun to hold talks with Hariri on Tuesday, during which the premier reiterated his refusal to hand over a seat from his own share in the Cabinet to the group of Sunni MPs.

But sources close to the negotiation process have noted that a breakthrough could be reached at any moment, a day after the World Bank issued a scathing report warning of further inaction.

From rising unemployment and debt to GDP ratio, to increasing poverty rates, the World Bank highlighted Lebanon’s lack of obvious sources for an economic boost before calling for the implementation of swift reforms to tackle these issues.

Lebanon’s medium-term economic prospects remain sluggish, it said, indicating that the economy has "struggled to reduce widespread poverty and generate inclusive growth." 

“The risk profile for Lebanon is rising sharply in light of the convergence of a number of negative local and global factors, including global monetary conditions,” it said. “Fiscal and electricity reforms are highlighted as priorities.”

The positive confidence following the CEDRE IV donor conference, during which the Lebanese government secured over $11 billion in grants and soft loans to kickstart the economy, has waned as the government impasse lingers on. 

The Central Bank has continuously attempted to counter this downward trend, with the latest being a swap of Treasury bills held by BDL with newly MoF-issued Eurobonds in the amount of $5.5 billion, around $3 billion of which were subsequently sold (along with enticements) to banks.

This was done to raise BDL's foreign exchange reserves, which reached around $44 billion by the end of June.

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