Whenever Lebanon was teetering on the financial brink in the 1990s, the country’s then prime minister, the late Rafic Hariri, boarded his private Boeing twin-aisle aircraft and flew to Riyadh.
The kingdom would arrange emergency help that staved off the economic pressures, until the next crisis loomed.
Lebanon’s already large public debt has multiplied many times since then, and Hariri’s son Saad is now prime minister, facing a similar problem.
Beirut is up against deep financial strain but the release valve on which his father could depend is shut.
Rafic had a larger-than-life stature and deep trust in Riyadh and the UAE, but today the situation is very different.
The elder Hariri also had a strained but sometimes working relationship with Hezbollah – right up to the moment he did not.
The group is accused of his 2005 assassination and refuses to hand over four of its members indicted by a UN tribunal for involvement. But Hezbollah’s influence has grown over the years.
Lebanon no longer has the luxury of time
French diplomat Jacques de Lajugie
The Iran-backed militant group has increasingly used its status as the most significant armed player in Lebanon to undermine regional stability, intervening in Syria and challenging states elsewhere in the Middle East.
Its actions have helped to fan tension across the region.
The group, which has the loyalty of a large bloc in the Lebanese Parliament, puts Lebanon at risk of losing regional assistance during crises.
Some states are reluctant to help now, concerned that their money may end up in the hands of Hezbollah, say sources involved in international efforts to support the country economically.
A major donors' conference in 2018 pledged $11 billion (Dh40.4bn) to help the Lebanese economy.
The pledges were in the form of infrastructure and other projects that are conditional on reforms some financiers consider near impossible to carry out under Lebanon’s dysfunctional political system.
Saudi Arabia promised $1bn in Paris. But since the pledges may not be paid out without reforms, their cost could be minimal.
A Lebanese official whose department would be in charge of carrying out many of the projects reportedly resigned a few weeks ago, saying there was no political will in Beirut to implement them.
Last month, rating agency Moody’s said weakening capital inflows and slowing growth in Lebanon’s bank deposits could force the government to reschedule public debt or resort to “another liability management exercise that may constitute a default under our definition”.
Moody’s assigned Lebanon’s debt further to junk status and Banque du Liban, the country’s central bank, has largely failed to twist the arm of private banks to lend to the state at lower interest rates.
Lebanon has a veteran central bank team and its foreign currency reserves are large, but public debt has ballooned to 150 per cent of gross domestic product.
Rouba Chbeir, a senior economist at Blominvest Bank in Beirut, said the government’s projected cuts in this year’s national budget were optimistic.
Amid Lebanese debt market jitters, Qatar in January this year said it would buy $500bn in Lebanese dollar-denominated bonds.
Doha might have seen a political advantage in the reduced presence of other Gulf states in Lebanon, since some of those nations cut ties with Doha over its support for extremists and Iran, and for meddling in their affairs.
Karen Young, a resident scholar at the American Enterprise Institute, said the tensions between Qatar and most of the rest of the GCC states undermined the possibility of a financial rescue that could ward off a twin currency and banking crisis.
“If Qatar wanted to save the day, it should have bought or capitalised a few Lebanese banks," Prof Young wrote in an article for the Financial Times.
"Yet even a much larger capital injection ... would not solve all of Lebanon’s problems."
Even France, an ardent supporter of Saad Hariri, has not hidden its disappointment with Lebanon’s corruption and fragmentation, which will make GCC decision-makers even less willing to become involved.
Beirut daily L’Orient Le Jour quoted a French diplomat as saying on Thursday that donors across the board were becoming impatient.
“Lebanon no longer has the luxury of time,” said Jacques de Lajugie, who is in charge of economic affairs at the French embassy in Beirut.
Updated: July 15, 2019 02:26 PM