Analysis

Hizbullah leads Lebanon to worst economic crisis by obstructing reforms

By Nohad Topalian in Beirut

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A kilogramme of coffee was sold for 28,000 Lebanese pounds in Beirut in July 2020 amid a major economic crisis and a drastic increase in the price of goods. [Joseph Eid/AFP]

Hizbullah is preventing Lebanon from implementing reforms required by the International Monetary Fund (IMF) to receive aid the country urgently needs to pull itself out of its worst economic crisis in decades, experts told Al-Mashareq.

Talks between Lebanon and the IMF have been deadlocked for months, with leaders reluctant to enact reforms.

Lebanon's request for financial aid comes as its economy is heading for a 25% contraction. It also comes at a time when the US is actively seeking to weaken Hizbullah's financial channels and crack down on money laundering.

Among the IMF's demands are that Lebanon audit its central bank. But on Friday (November 20th), the international firm contracted for the audit pulled out after failing to receive data it needed for the mission, the Lebanese presidency said.

New York-based Alvarez and Marsal had extended a November 3rd deadline by three months for Lebanese authorities to hand over the necessary information after they failed to submit it on time, AFP reported.

But "finance minister Ghazi Wazni informed the president that he has received a letter from Alvarez and Marsal, terminating the contract signed with the finance ministry", the presidency said in a statement.

A separate finance ministry statement said the firm was not certain it would be granted access to the necessary data despite the new deadline.

Hizbullah 'impeding reforms'

Hizbullah's control over the government's decision-making process has prevented the formation of a new government for almost one year.

In a September 29th speech, Hizbullah chief Hassan Nasrallah said, "We should have a presence in the government to protect the resistance... we cannot accept the establishment of a government that will blankly sign on the terms set by the IMF."

IMF Managing Director Kristalina Georgieva stated on October 14th that Lebanon is "witnessing a catastrophic economic situation due to the lack of political will... we need a partner willing and able to engage with the IMF... to conduct an audit of the financial institutions' accounts and formulate a credible economic plan for Lebanon's investors and creditors."

Hizbullah "is the only impediment to any reform that would save Lebanon from total collapse", former MP Fares Souaid told Al-Mashareq. "It only allows reforms to be implemented if they match its own interests, not those of the Lebanese people."

Souaid said Hizbullah "is responsible for the financial crisis in the country, the collapse of the middle class, and obstructing reforms demanded by the IMF as a condition for aid".

"As long as Hizbullah controls the country, international financial aid would be difficult to obtain and thus, the Lebanese will continue to suffer," he said.

'A bankrupt state'

Economic analyst Tony Farah said Lebanon "has become a bankrupt state due to the frightening economic decline".

According to the IMF, the gross domestic product (GDP) at the end of this fiscal year could be as low as $18 billion, down from about $52 billion last year, he said. This would lead to a higher rate of unemployment and poverty and a continuation of Lebanon's electricity crisis.

Power cuts across the capital Beirut have exceeded 20 hours a day in some areas. Meanwhile, the Lebanese pound has lost 80% of its value since last October.

Hizbullah is the main reason for the current financial crisis, in part because it controls border crossings and engages in smuggling. It is virtually controlling an economy parallel to the legitimate Lebanese economy, Farah said.

Should the current situation continue, he said, the IMF would not release any aid to Lebanon because the international community views Lebanon as being controlled by Hizbullah and Hizbullah benefiting from any aid to Beirut.

Many are now concerned that just as initial negotiations with the IMF were unsuccessful, Hizbullah would create obstacles for further negotiations. Determined to be part of the government, Hassan Nasrallah rejected ideas of privatisation and taxation, angering many politicians and members of the public, Farah said.

Hizbullah's aspirations contradict Lebanon's interests

Political writer and Shia opposition figure Ali al-Amin said Hizbullah "is majorly responsible for Lebanon's collapse".

"Without implementing extraordinary measures, it would be very difficult to save the country because of the magnitude of the crisis and existential challenges," he said.

Hizbullah's priorities are beyond Lebanon, he told Al-Mashareq. The party has regional and military aspirations that contradict those for a better Lebanon.

Hizbullah's interests, especially those that help advance the expansionist plans of Iran's Islamic Revolutionary Guard Corps (IRGC), contrasts with Lebanon's interests, he added.

By contrast, he said, "Hizbullah leaders believe changing the rules of the game is not in their interest and in fact could endanger their existence, so they would do anything to stop reforms in the country".

The attempt to establish a government that would not bring about any real change proves that no real effort is being made to implement reforms, al-Amin said.

Any new government controlled by Hizbullah would most likely run the country in the same fashion that led to its collapse, he added.

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