Tag: Protests

  • Lebanon’s Economic Crisis and Political Unrest

    Lebanon’s Economic Crisis and Political Unrest

    The Lebanon crisis illustrates the outcome of an inefficiently regulated market economy, shaped by long-term instant gratification of economic policies. Economy is run by corrupt institutions with ingrained crony capitalism, bureaucratic regulations and over-reliance on foriegn exchange.

    Lebanon is a free market economy in West Asia, bordered by Syria and Israel and the Mediterranean Sea, and hence, was a frequent recipient of spillovers of unrest and refugee crisis from the neighbouring countries. It is a service-sector dominated (majorly, banks and tourism) economy with a GDP of $56.9 billion─ growth rate of 0.2%, compared to 0.6% the previous year and a workforce of 2.4 million out of which 30 percent include Syrian refugees. The country relies heavily on imports (consumer goods, machinery and equipment etc) with a low dependence on exports (vegetables, non-precious metals and textiles). For years, Lebanon used foreign remittances such as transfers from non-resident Lebanese, foreign deposits and high government loans to balance the trade deficit. Lebanon exchange rate had been kept fixed at 1500 pounds per dollar which was also a fiduciary currency in Lebanon. Thus the higher demand for dollars to fixate the exchange rate, and meet the domestic demand for dollars, is levelled using foreign deposits by offering high yield rates, which had to be further funded by more deposits at even higher interest rates. These faulty policies had sustained the economy until interest payments had snowballed into heavy burden.

    Figure 1: trend of GDP per capita in Lebanon

    Source: Trading Economics

    Lebanese economy is also characterized by high government debt, substantially from domestic banks, borrowed primarily for reconstruction of the economy post civil war (1975-90). Over the years, the government relied more heavily on deficit financing to meet government spending, while the weak governance and corrupt politicians moved along with unfulfilled reforms and poor economic development. There was an underprovision of basic necessities like hassle-free electricity supply, regular water and waste management. On the other hand, crony capitalism had built up, with favours laid out to private businesses which were ultimately owned by rich, exploitative politicians. The debt-to-GDP ratio peaked to 150% by 2019, with a budget deficit of 11.5% of GDP and 50% of the revenues are consumed in debt servicing. This led to an economic crisis, followed by a political crisis, and ultimately snowballed into a financial crisis, rendered vulnerable and  in desperate need of foreign aid to see the day.

    Evidently, though Lebanon crisis started in late 2019, it is the result of long term economic policies mismanaged by corrupt political elite; when the government proposed to tax ‘free-calls in Whatsapp’ to meet the mounting budget deficit in October 2019, protests erupted across the country, catapulting into political unrest and ousting the prime minister. Investors and citizens lost confidence in the system, and led to reducing capital inflows.

    Their sovereign bonds were rated as highly risky assets (probable default),  leading to interest rates as high as 15%. The political uncertainty and the liquidity crunch, led to freezing of external deposits, while the steady domestic and foreign demand for dollars persisted, leading to a shortage of USD. The banks levied restrictions (weekly quotas) on dollar withdrawals, the dollar rate spiked, depreciating the pound, and reducing the purchasing power of the pound. This had squeezed the middle and low income strata the most, draining their last pounds of savings, since their debts substantially constituted dollar repayments. Businesses relying on dollars for most part were affected as the price of imports sky-rocketed, and the oil crunch tightened until the central government stepped in to ease the situation. The condition degraded further by the onset of Coronavirus and the lockdown, which led to widespread unemployment and inflation. The World Bank estimated that 50% of Lebanese population could be pushed below the poverty line by 2020 if immediate action is not taken.

    The debt of Lebanon has built up to 124464 billion LBP, i.e nearly $82 billion and the country has become the 3rd most indebted country in the world. In March 2020, Lebanon government, as a decisive step to prioritize the domestic concerns of the country and retain sustainable foreign exchange reserves in the economy, had defaulted on the Eurobond debt of $1.2 billion for the first time. The ailing economy seeks to restructure the other outstanding debts amounting to $31 billion and has been seeking advice, especially from the IMF on debt restructuring measures. There is a need for an ‘economic rescue plan’ to protect the depositors from this worst economic crisis Lebanon has faced.

    Figure 2: trend of Lebanon government’s debt

    Source: Trading Economics

    Foreign aid from the institutions is a big responsibility, as it would demand austerity measures from the economy that had dwelled in capitalistic pleasures for so long. Though, CEDRE and foreign countries like France and UK have promised ‘soft’ loans to the Lebanese government, economists believe that external aid would be unproductive, and will become an additional debt burden on the already bleeding financial system unless government inculcates greater transparency and accountability to the public, ousting corruption and following through on long-term economic policies with commitment.  Lebanon government is also seeking aid from the IMF. But  this would certainly entail strict reform targets linked to the outflow of credit and hence, is very unlikely.

    For the immediate future, Lebanon’s economic policies should be directed towards increasing  self-reliance in the economy, with higher focus on manufacturing sectors to create employment. Financial policies to stabilize the economy are of primary concern. It is time to make up for the blunders of non-performing investments in the electricity industry. Investments on infrastructural development should be realized and substantial attention should be given to improving  socio-economic conditions of the people. Construction and manufacturing industries should be supported. Actions should be taken to handle the refugee situation, and check the drain of human capital out of the country.   It could be said that Lebanon’s government has a long way to go before it can regain the confidence of its people and the foreign investors in order to stabilize the economy.

    Current Scenario

          Covid 19 has a destructive and deleveraging impact on all the economies, and Lebanon is no exception. The economy is heavily dependent on the service sector, especially tourism, and foreign remittances. The impact of the coronavirus pandemic has been devastating on the money the expats send home, which makes up nearly 12.7% of the GDP, making Lebanon the second-most remittances dependent middle-eastern country, only behind Palestine. Amid the collapsing economy and the disruption triggered by the Covid-19 pandemic, the only certainty is the gathering pace of Lebanon’s political unrest.

     

    REFERENCES

    https://www.nytimes.com/2019/11/15/world/middleeast/lebanon-protests-economy.html?action=click&module=RelatedLinks&pgtype=Article

    https://www.nytimes.com/2020/05/10/world/middleeast/lebanon-economic-crisis.html

    https://www.trtworld.com/magazine/what-s-behind-lebanon-s-economic-crisis-35874

    https://www.nytimes.com/2020/03/07/world/middleeast/lebanon-debt-financial-crisis.html

    https://www.nytimes.com/2019/12/03/world/middleeast/lebanon-protests-corruption.html?action=click&module=RelatedLinks&pgtype=Article

    https://www.theguardian.com/world/2020/mar/07/lebanon-to-default-on-debt-for-first-time-amid-financial-crisis

    https://www.nytimes.com/2020/03/07/world/middleeast/lebanon-debt-financial-crisis.html

    https://www.nytimes.com/2019/10/23/world/middleeast/lebanon-protests.html

    DATA- https://data.worldbank.org/country/lebanon

    https://www.britannica.com/place/Lebanon/Trade

    https://tradingeconomics.com/lebanon/government-debt

     

    Image Credit: Adobe Stock

  • An unmitigated disaster

    An unmitigated disaster

    Category : Democracy & Governance/Governance, Law & Order

    Title : An Unmitigated Disaster

    Author : Deepak Sinha 04.03.2020

    The ill-conceived CAA act and the fears induced by it and the issues of National Population Register have led to nation-wide protests. The resultant police actions at various places culminated in the Delhi violence and police inaction that has given rise to world-wide condemnation. That it coincided with US President Trump’s visit should be even more worrisome for the government. Deepak Sinha analyses the issue in his Op-Ed.

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  • India’s Illegal Immigration and Citizenship Issues: Tussle between Politics and Policy

    India’s Illegal Immigration and Citizenship Issues: Tussle between Politics and Policy

    It is indeed difficult to comprehend this Government’s precipitous push for the Citizen Amendment Act (CAA), in the manner that it has, at a time when the economy is on the edge of a precipice and it has yet to satisfactorily resolve serious issues like Kashmir that it has on its plate. True, illegal immigration is of huge concern around the world, and even more so in our case as the issue has been further complicated by the deleterious effects of Partition. However much the young today may wish away the past, we are still bound by it. Regardless of whether one subscribes to the “Two Nation Theory” or not, Pakistan emerged as the homeland for Muslims of the Sub Continent while India came to be regarded as the home for those dispossessed because of their religious affiliations from those areas. 

    One tends to forget that the Preamble to the Constitution, when first adopted, described India as a “Sovereign Democratic Republic” in which “liberty of thought, expression, belief, faith and worship” were guaranteed. Socialism and secularism were only added to our preamble as an afterthought by the Congress Government of Mrs. Gandhi in 1976 through the 42nd Amendment, obviously to gain political advantage and protect her own minority vote bank. In a sense that has now come to haunt us as the BJP proceeds to curry benefit for its Hindutva plank, as the CAA clearly attempts to do, though ostensibly it is aimed at correcting an old wrong.   

    Religious minorities in both countries were given a semblance of relief with the signing of the Nehru-Liaquat Agreement of 1950 that required both countries to protect minorities. While Indian Muslims, among others, continued to enjoy the fruits of democracy in a secular republic, the same could not be said for Pakistan, and subsequently Bangladesh, after its formation. Minorities there continued to be discriminated and persecuted against on religious grounds, forcing lakhs of Hindus and Sikhs to flee across the border. The Government of India’s subsequent refusal to grant citizenship to the fleeing Hindus and Sikhs, as had been publicly promised by both Mahatma Gandhi and the Congress Government in 1947, left them stateless and in penury and was certainly a dark chapter in our history. 

    Subsequently, after 1971, the issue was further complicated as Bangladeshi Muslims too crossed over in an attempt to improve their own economic prospects. It is also an undisputable fact that much of this flow of illegal migrants was aided by Governments then in power in Assam and Bengal that were shortsighted enough to believe that this flood of  illegal immigrants would increase their vote banks and allow them to subvert elections. It is ironical that the very parties involved in this immoral and criminal act are today at the forefront of the Anti CAA protests. While the Nellie Massacre and the Assam Student Agitation brought a halt to this farce in Assam in the early Eighties, it has allegedly continued unabated in Bengal even to this day.

    Politicians, activists and media persons who today question the extent of illegal immigration, especially from Bangladesh, would do well to study the extremely balanced and insightful “Report on Illegal Migration into Assam Submitted to The President” by Lt Gen S K Sinha (Retd), then Governor of Assam, on 8 Nov 1998. As most readers would be aware while the extent of actual illegal immigration into Bengal and other states is not available, anecdotal evidence suggests that it has been extensive and has impacted the social fabric of these States. Indeed, most of those who question attempts to curb or quantify the extent of illegal immigration are being deliberately obtuse and intent on promoting a false narrative motivated more by their bias against the current Government and their need to hide their own involvement in promoting this flood of immigrants. 

    The Assam Accord signed by the Congress under Mr. Rajiv Gandhi in 1985 required a process to be initiated for the “detection and deletion of foreigners.” In this context under the aegis of the Supreme Court action was initiated in Assam to update the National Register of Citizens (NRC) that had been prepared in 1951 by recording particulars of all the persons enumerated during that Census. This update was to include the names of those persons (or their descendants) who appear in the NRC, 1951, or in any of the Electoral Rolls up to the midnight of 24th March, 1971, or in any one of the other admissible documents issued up to then, which would prove their presence in Assam or in any part of India on or before 24th March, 1971. As per Prateek Hajela, State Coordinator of the NRC Project, “A total of 3.1 Crore persons have been found eligible for inclusion in the final NRC list, leaving out 19.,06 Lakh persons including those who did not submit their claims.” They now have the right to file an appeal before Foreigners Tribunals.

    This implies that once the process of appeals is complete, those declared as illegal immigrants, as defined by the Citizenship Act of 1955, will have to be either imprisoned or deported under the Foreigners Act, 1946 or the Passport Act, 1920. However, this has placed the Central Government and the Assam Government on the horns of a dilemma because the vast majority of those who are presently ineligible for inclusion in the NRC are Hindus. Logically speaking, deporting these people would be a gross miscarriage of justice given that they fled their country of origin due to religious persecution. In anticipation of this problem the Government amended the latter two Acts in 2015, thereby exempting Hindus, Sikhs, Buddhists, Jains, Parsis and Christians from Afghanistan, Bangladesh and Pakistan, who had fled to  India before 31 Dec 2014 because of religious persecution, from being deported. A natural corollary to this action would have been to amend the Citizenship Act 1955 to grant citizenship to these groups in an earlier timeframe, rather than the eleven years that the Act otherwise requires. This is exactly what the Government has done with the CAA, 2019. That such an action will also help further its own political agenda is undeniable, but that is exactly how all politicians in power work.

    All of this goes against the interests of the Assamese who view the issue in purely ethnic terms. Their protests, therefore, are against inclusion of Bengalis as citizens regardless of their religious affiliations as they believe that they are being swamped numerically, culturally and linguistically. One fails to understand why the Central Government, which has the benefit of its own party in power in the State, was unable to anticipate the likely consequences of its actions. Obviously, either both the central and state leadership ignored or misunderstood the signs, but whatever be the case the Party has certainly harmed its own cause and faces an uphill battle in regaining popular support. In the context of the rest of the country however, the adverse reaction that this step has drawn is clearly political in nature, initiated by those who fear they will lose out at the hustings because of this.

    The opposition narrative that has been propagated is along two thrust lines. Firstly, it appeals to the liberal secular mindset, which already sees this government as autocratic and fascist in nature, that the CAA is discriminatory, as it leaves out Muslims from those countries, thereby eroding our secular identity, and is therefore unconstitutional. Secondly, it creates a fear psychosis among the minority Muslim population by linking it to the NRC and suggesting that it will be used by this Government to harm their community. The Police by their highhanded behaviour and excessive use of force in dealing with the protests have only reinforced this narrative.

    While it is for the Courts to decide on its constitutionality, prima facie the argument seems to lack substance because the Act is only applicable to non- citizens who are not covered by the provisions of our Constitution and in effect corrects an earlier wrong. Moreover, if legislation is to be treated as unconstitutional purely on the basis that it is discriminatory in nature, then how does one justify existing laws on the subject and is it not time for the uniform civil code to replace all our other such Acts in place? Clearly, for those who ignore these arguments, Bertrand Russell’s belief that “Men are born ignorant not stupid. Education makes them stupid,” appears to have some relevance. 

    With regard to the fears that have brought many of our Muslim brethren to take to the streets, the issues involved appear to be more complex. There can be no two views that the updating of the NRC is a legitimate exercise that every State undertakes to protect its sovereignty. No State can let its ethnic, religious or linguistic profile be overturned by illegal immigration as that will adversely impact society. However, the NRC can also not be used by any government as a tool for harassment. This is unfortunately where this Government loses out because over a period of time its actions have come to be viewed with suspicion by the public at large and specifically by our minority population. There is a huge trust deficit and people tend to be extremely suspicious of its motives. Moreover, now that the Ram Temple issue has been more or less settled, there is the fleeting suspicion that this Government now intends to use NRC to further its Hindutva agenda.  That apart, there have also been numerous occasions on which this community has faced unprovoked attacks, with little being done to assuage their feelings, especially as perpetrators have rarely been brought to justice. It is also a telling comment on their treatment that violence during these ongoing protests has primarily been restricted to states that are run by the BJP. 

    This has allowed the opposition parties to cynically peddle a blatantly false narrative and spin it in a manner that gives it enough credence to coalesce not just minority groups in their favour, but also others who have been distrustful of the way this government functions, with little regard for transparency, dialogue or rule of law. In the meantime the Modi Government has now decided to change tack, put the NRC on the backburner and proceed forward with the updating of the National Population Register (NPR) that only records the list of people in the country, instead. However, this move is also unlikely to be taken kindly since for all intents and purposes, it is a precursor to the NRC and provides relevant data that it can use. 

    The way forward in resolving this contentious situation can hardly be the one that results in further confrontation or adds to the distrust quotient. Mr. Modi would be well advised to take a step back and invite political parties and civil society for a fresh dialogue on all touchy issues. In addition they must look at including appropriate provisions to the guidelines for conduct of NPR/NRC that statutorily ensure that minorities and the poor are not harassed during the process. In any case the Assam NRC process and its final results show that despite our best efforts, deportation of illegals is a very distant possibility. It may therefore be a far better alternative to adopt a more practical and less contentious approach. One such option could be that those identified as foreigners continue to be permitted to remain and work here, without probably being given the right to vote or acquire property. However, their children born here should automatically be made citizens as per existing laws.      

    The author, a military veteran, is Senior Visiting Fellow at The Peninsula Foundation, Chennai and a Consultant at ORF, New Delhi. Views expressed are the author’s own.