The top challenges facing Lebanon's new government

Lebanon's new government, approved by parliament after more than a year of political deadlock, has its work cut out as it seeks to rescue the country from its worst-ever economic meltdown.

Fuel and medicines are in short supply, power blackouts last most of the day, more than three out of four people have been plunged below the poverty line, and many of those who can are leaving the country.

Here is a look at the most pressing issues for Prime Minister Najib Mikati and his 24-member cabinet, and at the biggest hurdles ahead.

What are the top priorities?

The new government, approved Monday by parliament, desperately needs to lift Lebanon out of what the World Bank has called one of the world's worst economic crises since the 1850s.

The Lebanese pound has lost almost 90 percent of its value against the dollar on the black market, inflation has soared and people's savings are trapped in banks.

With foreign currency reserves plummeting, the cash-strapped state has been struggling to maintain subsidies on basic goods.

Petrol and medicine have become scarce and the state barely provides two hours of electricity a day.

"The first priority for the government really will be to stem the collapse," said Maha Yahya, director of the Carnegie Middle East Center.

Subsidies need to be lifted and a social safety net put in place to ease the blow on the most vulnerable, she said.

To do this, analysts have said, the cabinet will need to relaunch talks with the International Monetary Fund to unlock billions of dollars in financial aid.

Lebanon, after defaulting on its debt in March 2020 for the first time in history, started talks with the IMF, but these quickly hit a wall amid bickering over who should bear the brunt of the losses.

What are the biggest hurdles?

The international community has demanded sweeping reforms and a forensic audit of the country's central bank before any financial assistance is disbursed.

The previous government in 2020 announced a rescue roadmap that included electricity sector reform, restructuring of the banking sector and lifting the official dollar peg.

But these steps have yet to be implemented.

As for the central bank audit, it too has stalled, with the central bank claiming it could not provide the auditing firm with some of the required documents because of banking secrecy rules.

Finance expert Mike Azar said that reforming the commercial banking sector and central bank, as well as restructuring the public sector, would be key for any deal with the IMF.

"There isn't anything you can do short of these two major restructurings," he told AFP.

But the traditional ruling class that has dominated politics in Lebanon since the 1975-1990 civil war was likely to be reluctant.

"Restructuring the public sector has an impact on the political parties, as it is the main financing source" for their patronage system, he said. "How would they accept that?"

Although some of the 24 new ministers in Mikati's cabinet are technocrats, all have been endorsed by at least one of Lebanon's many competing political parties.

Yahya said drawing up a medium- to long-term rescue plan for the country would be a "major challenge" as the new government lacked any political consensus.

"This government was formed with the business-as-usual mentality so everybody there represents one political leadership or the other," she said.

This means political parties "can use the ministers within the government to block any reform they see as undermining their interests or unpopular in the street".

Will there be new elections?

Mikati has vowed to hold scheduled May 2022 parliamentary elections on time.

Lebanon was rocked in 2019 by protests calling for the overhaul of the entire political class, and some activists see elections as a chance to vote out an old guard they deem incompetent and corrupt.

But analyst Michel Doueihy said the political parties in power since the end of the civil war are ready to do anything to cling on to power.

The traditional ruling "class is trying through this government to catch its breath" and restore some credibility ahead of the next parliamentary elections, he told AFP.

He said their tactics could even include postponing the polls.

© 2021 AFP