By Kit Roberts
LEBANON is a country in crisis. The culmination of a banking crisis which has left the central bank potentially unable to support currency exchange, poor infrastructure, as well as rife government corruption are creating a perfect storm.
Such instability, and the challenges innate in even the most day to day economic exchanges, have only exacerbated what was already a difficult situation.
To make matters worse, faith in the willingness and ability of the Lebanese government to affect change is extremely low. The catastrophic explosion in Beirut solidified in many people’s minds the absolute inability of the political class to even begin to address the country’s many problems.
But for many, one issue has become symbolic of the systemic failures, and that is the disastrous state of the power grid.
Muzna Al-Masri is an anthropologist and researcher who consults for several UN organisations, she is currently researching corruption and energy innovation in Lebanon.
She explained how challenging the problem is for many Lebanese people.
“In a way the energy crisis has been symbolic of the failures of the state in Lebanon, symbolic of the failures of postwar construction. They’re always tied together,” she said.
“That kind of relationship even in people’s daily lives, every time you suffer from electric cuts, it’s sort of symbolic, it carries the overall suffering.
“Electricity cuts have a serious impact on people’s every day lives, particularly a gendered impact on women. Not just about the practicalities of managing the cuts, it’s also just having to manage your life around electricity cuts.”
The central grid, Électricité du Liban, runs on highly inefficient and polluting heavy fuel generators. These are reliant on imported fuel to generate power, and are unable to supply electricity all day.
Many Lebanese people instead take up subscriptions with local generators, Muzna explained, where someone can pay either a fixed tariff for a certain number of amps, or get a metered subscription.
When the national supply cuts out, you turn a big switch in your home to change to the local subscription.
But with a lack of regulation of these privately owned generators, it is becoming increasingly difficult to ensure in their sellers’ market that their prices are fair, as many will have a monopoly over the apartment block or neighbourhood their generator covers.
Muzna explained: “You could could demand that you have a metre, but over the last year and a half, the monitoring by the ministry of finance has declined and electricity cuts went up, and the prices of diesel and the ability to acquire diesel by generator owners. So a lot of generator owners stopped abiding by that kind of metering.
“What we saw is where in some villages where there is good monitoring by the municipality that continues to be the case, it keeps the price at a certain level, but in many other areas this is not the case.
“By the time I left Lebanon the monthly subscription was about 50 per cent of the minimum wage, for ten amps.”
Economist Neil McCulloch has worked with Muzna on research into the power problems Lebanon is facing.
He outlined some of the infrastructural problems the country is undergoing.
“The national grid has been old and decrepit for some time. It’s powered by a bunch of old power stations which run on imported heavy fuel oil. They had a big contract with the Algerians to supply oil for these extremely polluting old power stations,” he said.
“They generate the pretty limited quantity of power that Lebanon has had for years. The whole thing is run by EDL, the Électricité du Liban, it turned out of course that the fuel contracts were corrupt.
“They discovered corruption allegedly on both sides for the supply contract, and so the contract was terminated. So that’s raised the issue of where the fuel’s going to come from.
“As a consequence of the crisis it’s running out of foreign exchange rather rapidly. So the central bank is signalling that some point in the relatively near future it’s not going to be able to afford to support the purchase of fuel at the subsidised rates.
“They’re allowed to purchase it using foreign exchange. When they can’t afford to purchase it using foreign exchange the actual price of fuel, both at the petrol pump and of electricity would rise very rapidly.”
This has been played out in recent weeks in grim scenes at petrol stations throughout the country, with queues snaking down roads and angry confrontations not being uncommon.
Lebanon’s inability to support exchange rates has also massively exacerbated this problem.
When we did the interviews for this piece, the Lebanese lira was valued at around 10,000 to the dollar on the black market, in comparison to its official rate of 1,500 to the dollar.
This month, it has topped 18,000.
The massive discrepancy, on top of the frequent power interruptions which make running a digital economy increasingly challenging, is a vicious circle.
Pallavi Roy is a senior lecturer in international economics at SOAS, and explained how the increased instability is continuing to make things worse.
“Most financial crises have their roots in uncertainty,” she said, “when investors can’t make a play for the future, they are uncomfortable putting their money where their mouth is.”
She added: “It can’t pay for its exports. It’s a very import dependant country. A lot of things added up to come to where we are today.
“Then there’s this awful moment where you don’t have a president from 2014 to 2016. It’s been a dysfunctional political system.
“They were just borrowing far more than what they could afford, the currency collpased from 2019 onwards. That’s when we’re looking at an economic crisis.”
And with the power grid dependent on imported fuel, it’s not difficult to see how an inability to support stable currency exchange with the dollar could create problems for the aged power grid.
“It’s fast becoming a humanitarian crisis,” said Pallavi, “and of course you also have the issue of Syrian refugees pouring in. It’s not to say that’s the main reason but it’s certainly exacerbated the economic crisis.”
Syria also has several complex historical ties with Lebanon, including acting as a sponsor at the Paris Agreement in the country. This agreement oversaw the creation of a system in which each sect had a right to representatives in parliament.
But with the complete collapse of Syria into chaos, a knock on effect has been that any semblance of that old sponsorship is now long gone.
The day to day effect for people in Lebanon is one of a draining daily calculation of where power should be allocated. Do you wash clothes, charge your laptop, or use the elevator to bring drinkable water up to your flat?
For Lebanon, what to do with power remains an uncertain and charged question.
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