Lebanon’s new parliamentary formation is a ‘double-edged sword’ for the economy: expert
Lebanon’s new parliamentary formation is a ‘double-edged sword’, an economist told Al Arabiya English on Wednesday, expressing concern about the MPs’ ability to initiate real change and help the country finally emerge from the long economic crisis and financial. .
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“We consider the new parliamentary composition as a double-edged sword. On the one hand, the rise of pro-Western and pro-GCC forces, in addition to the “forces of change”, could have positive elements for the opening of the country to the global financial community and could have positive effects on the securing potential international aid,” said Marwan Barakat, Chief Economist and Head of Research at Bank Audi.
“On the other hand, the legislative elections lead to a very fragmented parliament, without anyone being able to call the majority, and with the presence of a large number of blocs and independent deputies,” he explained.
Divide and rule
The results of the Lebanese legislative elections were published on Tuesday by the country’s interior ministry. As the Iran-backed Hezbollah group and its allies lost their parliamentary majority – some to independent candidates – many lawmakers from mainstream political parties remained, as did two lawmakers charged in connection with the port blast of Beirut in 2020.
Independent candidates won at least 13 seats in the new parliament, making unprecedented gains.
Reformers, who campaigned on the legacy of an anti-establishment protest movement in 2019, could still win support from several other independent and non-aligned lawmakers in the 128-member assembly. Twelve of the thirteen reformist candidates are newcomers. They campaigned against Lebanon’s ruling elite, made up of sectarian parties that have ruled the country since the end of the civil war in 1990.
Many Lebanese accuse the entrenched political elite of being responsible for the country’s economic collapse in 2019 and failing to take action to stop it.
“While such a new reality is good for checks and controls, it also means that it would be difficult to reach an agreement on the main political and legislative steps,” Barakat said, stressing that it jeopardizes the plan of the International Monetary Fund (IMF). .
“There is a risk that the prior actions required by the IMF for a final agreement with Lebanon on an expanded financing facility will not be easily ratified by such a fragmented parliament,” he noted, adding that the possibility not to disagree on cabinet formation and presidential elections exist. “[This] suggests possible fears that Lebanon could enter a damaging vacuum in its political and executive leadership.
An election campaign billboard is pictured near Martyrs Square, ahead of legislative elections scheduled for May 15 in Beirut, Lebanon. Photo taken April 21, 2022. (File photo: Reuters)
In April, Lebanon reached a draft agreement with the IMF for a four-year, $3 billion rescue package, the final approval of which was conditional on the implementation of eight key requirements.
Considered crucial for Lebanon to emerge from the devastating financial crisis that has lasted for years, much hope rests on the IMF program to initiate change in the country.
“It is very important to reduce differences and divergences on key issues [in parliament]foster coordination and convergence and seek common ground between the different blocs and parties represented in parliament,” he said.
Unclear economic outlook
Bank Audi, a major financial group in Lebanon, released its quarterly report last week, predicting a very uncertain economic outlook this year.
A boy stands on the balcony of a building damaged by the Lebanese civil war (1975-1990) in Beirut, Lebanon, April 13, 2022. (File photo: Reuters)
“2022 has started with a number of notable developments in the country, namely the achievement of a staff level agreement with the IMF, the end of the diplomatic crisis with the GCC countries and the countdown to elections critical legislative and presidential elections,” Barakat said, when asked about the report’s findings.
“Yet, the outlook for the real economy for 2022 is highly uncertain and depends on future political steps, reaching a final agreement with the IMF, initiating structural reforms and securing international assistance. from abroad,” said the chief economist. , adding that real growth could vary between a contraction of -6.5%, as forecast by the World Bank for 2022, and an expansion of +2.5%, as forecast by the Institute of International Finance (IIF). ).
Barakat told Al Arabiya English that the IMF plan was necessary because it was “the only way for Lebanon to emerge from its persistent economic and financial crisis”.
with the agencies
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