On a salary worth less than $1,000 after the collapse of the local currency, in charge of a broken economy and housebound due to security concerns, it is little surprise that Lebanon’s caretaker prime minister is keen to quit.
“It is the only job in the world where you resign and then you’re stuck,” Hassan Diab told the Financial Times in an interview. He stepped down after the catastrophic explosion at Beirut port devastated the city in August last year, but political bickering has stymied the formation of a fresh cabinet led by prime minister-elect Saad Hariri. This meant Diab was “still prime minister effectively. You have to handle all the problems and you can see the problems how they’re compounding,” he said.
Political dysfunction has pushed the fragile nation towards total economic collapse and infuriated Lebanese struggling to survive as hyperinflation soars and unemployment rises. In recent weeks, protesters have taken to the streets and set up roadblocks on main roads to vent their anger. The country’s problems — a result of decades of mismanagement and corruption and exacerbated by coronavirus and the port explosion — threaten to overwhelm the small Mediterranean nation. The World Bank estimates almost half of the population has been plunged into poverty. Diab described the situation as “acute financial disaster”.
The commander of Lebanon’s army last week warned he did not have sufficient funds to cover the military’s needs for the coming year. Mohamed Fahmi, caretaker interior minister, said the political failure was “drain[ing]” Lebanon’s security forces, now unable to perform “90 per cent of our duties”. The government has also warned of future electricity shortages.
Recovery hinges on a bailout from the IMF but the caretaker government, which has been waiting for months for the formation of a new administration, cannot negotiate one. So “waiting an extra week for [Hariri to form] a cabinet is like aggravating the economic and financial situation an extra year”, according to Diab.
A university professor who presents himself as a technocrat without strong affiliation to a political party, Diab was appointed prime minister in December 2019, a role reserved for a Sunni Muslim. Since the civil war ended in 1990, Lebanon has shared power between its religious sects, but the horse-trading over positions creates huge delays. Diab, who wants to hand over the role, describes himself as a “hostage of Lebanese politics, of the way politicians have been running politics in this country for decades”.
Diab is in his comfortable west Beirut apartment, rather than the prime minister’s residence, the Grand Serail, because he has been advised to minimise his movements — but has not been told what the specific threat is. “I get a lot of security messages from different places,” shrugged Diab. “Ninety per cent of them turn out not to be true.” He says he does not have daily briefings with security officials.
Despite having previously served a term as education minister, Diab said he was surprised by parliamentary resistance to reforms. “Even those that gave us the vote of confidence, a good percentage of them, including the Shia arm, worked against us after we became a cabinet,” he added.
Iran-backed Shia Islamist movement Hizbollah — which has a powerful armed wing — was among the blocs that approved his ministers, a fact that had intensified Lebanon’s international isolation, Diab said. “Have I made a trip anywhere? Has anybody invited me, has anybody responded to my willingness to go to the Arab region?” he asked. “There’s a clear signal from everybody, not just the region but internationally, to be careful not to open up financially and economically . . . because they consider this cabinet a Hizbollah cabinet.” He insisted his cabinet was more independent than most: “We are the furthest away from Hizbollah.”
Diab, who oversaw Lebanon’s first sovereign default a year ago, described the chaos of a cash-strapped government struggling with a broken exchange rate. Contractors “are being paid partially, there are some delays”. Although “thousands” of public contracts were denominated in dollars, “everybody’s getting paid in lira . . . we don’t have dollars,” he said, adding that different exchange rates were being used for payment, all of them far below the black market rate of about L£13,000 to the dollar. In black market terms, Diab says his salary is now worth $1,000 per month. At the official rate, it is worth about $7,300.
The government owes $2m to a German company that removed 52 containers worth of toxic chemicals from Lebanese ports. The toxic waste remains in Lebanon because one month after the company finished work, the government has not paid up. Diab blamed “red tape”.
To address deepening impoverishment, parliament passed a law allocating L£1.2tn to support poor families and some economic sectors. But, with the central bank’s foreign currency reserves having dwindled to $16bn, this was resourced by “printing money”, said Diab. “What else?”
Still, Diab said his cabinet had made a difference, citing in particular a financial recovery plan and one for the return of refugees to Syria. But he said the last year had been “close to hell. I don’t regret it, but I don’t think any cabinet . . . has dealt with so many parallel simultaneous crises.”
Additional reporting by Asmaa al-Omar in Istanbul