Lebanon approved an emergency reform package on Monday in response to protests over dire economic conditions, but the moves did not go far enough to persuade demonstrators to leave the streets or investors to halt a plunge in its bonds.
Hundreds of thousands of people have flooded the streets since Thursday, furious at a political class they accuse of pushing the economy to the point of collapse. Roads were blocked for a fifth day across the country.
Schools, banks and businesses were closed, and Banks are expected to remain shut on Tuesday.
Prime Minister Saad al-Hariri, in a televised speech, said the new measures might not meet the protesters‘ demands but were a start towards achieving some of them. The government must work to recover trust, he said.
“You are the compass and … your movement frankly is what led us to this decision today,” added Hariri, who said big steps had been taken towards fighting corruption and waste.
But despite the reforms, Lebanon’s dollar-denominated bounds suffered hefty losses on Monday following sharp drops on Friday. Some sank to record lows.
Investors said the turmoil showed Lebanon was running out of time to fix its economic problems.
“It is just a mess – and it looks like it is more and more unsustainable. I don’t think it is a final nail in the coffin – but it is looking ominous,” said Kevin Daly, Senior Investment Manager, Emerging Market Debt at Aberdeen Standard Investments.
“There has been a fiscal adjustment, but it has not been enough.”
The reforms included the symbolic halving of the salaries of ministers and lawmakers, as well as moves towards implementing long-delayed measures vital to putting the public finances on a sustainable path.
Maya Mhana, a teacher listening to the speech in Beirut with other protesters, was not convinced. “We are remaining in the streets, we don’t believe a single word he said,” she said.
The protests have been extraordinary because of their size and geographic reach in a country where political movements are normally divided into sectarian lines and struggle to draw nationwide appeal.
Lebanon has one of the world’s highest levels of government debt as a share of economic output. The government includes most major parties, run by politicians widely perceived to have mobilised state resources and influence for their own gain.
The government approved a 2020 budget with no new taxes and a deficit of around 0.6% of national output, Hariri said, describing this as a historic achievement. The deficit for 2019 is around 7% of GDP.
Steps included abolishing the information ministry and some other state bodies.
The government would accelerate the long-delayed reform of the state-run power sector, which drains $2 billion from the treasury per year while failing to deliver enough power for Lebanese who depend on private generators to fill the gap.