As poverty increases, inflation skyrockets, and unemployment soars, Lebanon is facing the worst economic crisis in its history. Last week, the government began formal negotiations with the International Monetary Fund (IMF) to discuss a plan to rescue the economy and request around US$10 billion dollars in aid.
Millions of people in Lebanon are already struggling to afford food, housing, and other basic rights due to the double hit of an economic crisis and impacts of the Covid-19 pandemic. Meanwhile, the lack of a functioning social safety net and poor governance has left the majority dependent on a corrupt, sectarian-based “spoils system” for access to basic services, including jobs, education, and health care. Any economic reforms should protect people’s economic rights and address these underlying issues.
Lebanon has previously received four multi-million dollar aid and soft-loan packages since the end of its civil war in 1990, but the benefits were never shared equitably. The country remains one of the most unequal in the world, with 55 percent of the national income concentrated in the top 10 percent of earners.
The IMF will no doubt seek to reduce Lebanon’s debt, currently at 170 percent of its GDP, as well as decrease government expenditures and raise revenues. But the costs of these reforms should not fall on the poorest in the country by slashing spending on social services and making essential goods unaffordable. Even before the Covid-19 pandemic, the World Bank estimated that Lebanon’s poverty rates would rise to 50 percent in 2020, and inflation has drastically increased the price of necessities such as food, medicine, and utilities.
In particular, new tax measures should be progressive in nature and not exacerbate inequality and increase the cost of living in ways that undermine rights. Any cuts in subsidies to the electricity sector, which account for 40 percent of Lebanon’s debt, should be preceded by a comprehensive reform plan that ensures the most marginalized are still able to access electricity, essential to the enjoyment of a host of basic rights, like food, housing, and an adequate standard of living.
The IMF’s recommendations should encourage government spending on social services like education, health care, and poverty-targeting programs, while shoring up government revenues through improving the tax collection infrastructure and adopting stringent anti-corruption measures.
Fixing Lebanon’s balance sheets should not come at the expense of rights.