Lebanon’s economic woes continue, Hezbollah feels pinch

BEIRUT - Lebanon’s economic woes continue as the government remains paralysed and Hezbollah begins to feel the pinch of most recent US sanctions.

The sanctions against two Hezbollah lawmakers last month came shortly before two government minister aides were shot in a confrontation which has left government unable to convene since.

The paralysis has held up discussions of the 2020 budget, a vital part of efforts to plug gaping holes in public finances and convince investors that the state is serious about long-delayed reforms.

"Frankly, we can't stay like this for much longer," said a senior government official, adding that two credit rating agencies are due to issue reports soon which many fear will downgrade Lebanon’s rating.

US sanctions and Hezbollah

Economic struggles have also coincided with US sanctions against the highly influential Hezbollah.

US sanctions on the Iranian regime, Hezbollah’s primary backer, as well as direct sanctions against two of the party’s lawmakers has began to take it’s toll.

Washington named MPs Amin Sherri and Muhammad Hasan Raad to a terror-related blacklist, saying that Hezbollah uses its parliamentary power to advance its alleged violent activities.

Since then, the party’s Secretary-General Hassan Nasrallah has changed his tone from calls for jihad against Israel, to calls for a ‘financial jihad’ to help alleviate some of the bite that both sanctions and the war in Syria is having on the ‘Party of God’.

According to Hanin Ghaddar, political analyst for the Washington Institute for Near East Policy, Hezbollah “fighters and their families are beginning to complain about lost wages - a largely unprecedented development until recent sanctions.

"No doubt, it has taken a new direction," Prime Minister Hariri said of the sanctions

"But this will not affect the work we are doing in parliament or the ministers. It is a new matter that we will deal with as we see fit... The important thing is to preserve the banking sector and the Lebanese economy and, God willing, this crisis will pass sooner or later," he said in a statement.

Hezbollah’s influence on the Lebanese economy is compounded by the fact that they are the second largest employer in the country after the State.

Cutbacks to the group’s revenue streams are affecting Lebanese companies that have long contributed, and Shiites whose incomes have seen a downturn.

Government Paralysis

Lebanon’s parliament has been unable to convene for over a month despite efforts by the country’s President Michel Aoun to convince Prime Minister Saad al-Hariri to end the deadlock.

The paralysis came as a result of the killing of two aides of a government minister as his convoy passed through a village in the Chouf mountains.

He called the incident an assassination attempt by his opposition, but they deny the accusation.

Since then, efforts to mediate a way out of the impasse have been hindered over the question of which court should hear the case.

Speaking on Thursday to mark the 74th anniversary of the Lebanese army, the president ‘appeared to raise the possibility of Lebanon having to go to the International Monetary Fund if government reform efforts fail to bring enough improvement to state finances’.

Lebanon’s five-year credit default swaps jumped to 990 basis points, up 33 points following Aoun’s comments.

Financial institutions, including the IMF have urged Lebanese officials to implement structural reforms to strengthen the financial sector.