Mikati and al-Rahi Deliberate on Lebanon’s Challenges Amidst War’s Impact on Weak Economy

In a recent meeting at Bkerki, Caretaker Prime Minister Najib Mikati and Maronite Patriarch Beshara al-Rahi concurred that the path to resolving Lebanon’s crises lies in electing a new president.

Lebanon has been without a president since Michel Aoun’s tenure ended in October of the previous year. Meanwhile, the government has been functioning in a restricted caretaker role. Key positions remain vacant, including the head of the General Security agency, who retired in March without a successor, and the central bank governor, whose term expired in July with no clear replacement.

The Lebanese Parliament took steps to prevent a leadership vacuum in the military by extending the army chief’s mandate. This move averted further institutional decay in crisis-stricken Lebanon, although the Free Patriotic Movement (FPM) announced plans to challenge the law as unconstitutional.

Tensions escalated between Mikati and FPM Defense Minister Maurice Slim over military appointments, including the extension of Army Chief Joseph Aoun’s term. The positions of a new army chief of staff and two military council members are still pending.

Mikati and al-Rahi also addressed the economic and political turmoil and the ongoing border skirmishes between Israel and Hezbollah in southern Lebanon.

The Gaza war’s impact is further destabilizing Lebanon’s already fragile economy, threatening to plunge it back into recession just as it showed signs of recovery from years of crisis.

Mikati emphasized the importance of implementing international resolutions, including Resolution 1701, to resolve the border conflicts. He stated Lebanon’s readiness to comply, provided Israel reciprocates and withdraws from occupied territories as per international laws. This includes the disputed areas of Shebaa Farms, Kfarshouba hills, and Ghajar.

Resolution 1701, which concluded the 2006 war between Israel and Hezbollah, mandates the removal of armed forces south of Lebanon’s Litani River, barring U.N. peacekeepers and Lebanese state forces.

The border tensions have adversely affected tourism in Lebanon, a crucial economic sector.

The World Bank’s recent report predicts a contraction in Lebanon’s GDP for 2023, marking a deviation from earlier growth forecasts. The report critiques Lebanon’s reliance on tourism and remittances, noting their vulnerability to external and internal shocks and their inadequacy as sustainable economic growth drivers.

Lebanon’s economic crisis, which began in 2019, has seen soaring inflation and a plummeting local currency. The lira’s value has drastically declined, from a longstanding peg of 1,500 to the dollar to about 90,000 on the black market.

Prior to the war, Lebanon’s leaders hoped to fuel economic recovery through tourism and remittances, circumventing the reforms needed for an International Monetary Fund (IMF) bailout. Although Lebanon reached a preliminary agreement with the IMF in April 2022 for a $3 billion rescue package, most of the requisite reforms remain unfulfilled.

Caretaker Deputy Prime Minister Saade Chami, advocating for the IMF deal, acknowledged the lack of progress in recent months regarding these reforms. He countered the notion that the deal is defunct, noting that the IMF is still involved but awaits Lebanon’s action on its commitments.