Lebanon’s Time of Trial

ISTANBUL – As Lebanon braces for the possible indictment of Hezbollah operatives for the murder of former Prime Minister Rafik Hariri, the country’s economy is wobbling. The International Monetary Fund’s Mission Report of March 2009, pointing to the country’s 30 years of chronic political tumult, concluded that “Lebanon will remain vulnerable to shocks for many years” to come. While welcoming the anti-crisis action plan of the government at that time, the Fund held no illusion that it would be up to the task.

Later that year, however, the government of Saad Hariri, Rafik Hariri’s son, brought new hope, prompting the IMF to declare that it had “opened a new window of opportunity for invigorating economic reforms.” But the success of the planned reforms depends heavily on cooperation between Lebanon’s main political groups, the Sunni and the Shia, and there has been little of that so far.

Indeed, the influence of outside powers remains a central part of the equation. The meeting last July in Beirut between Syria’s President al-Assad and Saudi King Abdullah was tagged as a sign of rapprochement between two Sunni antagonists. But one of its purposes was to obtain the Syrian-backed Hezbollah’s support for an IMF-style recovery program. It remains unclear whether or not that goal was fulfilled.

Meanwhile, Lebanon’s main economic indicators show steady improvement: GNP increased from $21 billion in 2004 to $32 billion in 2009, inflation remains under control, foreign trade is balanced, and the unemployment rate is tolerable. Moreover, the Lebanese pound is pegged to the US dollar. According to the IMF, “the crisis did not directly affect the Lebanese economy, the banks are solid and the funds are flowing in.”