Lebanon's cabinet formation process, centered on sectarian power-sharing and entrenched political interests, continues to obstruct reforms, undermine governance, and fuel public frustration.
Nawaf Salam nomination and what was seemingly an easy task to break away from entrenched politics has rapidly been moving to political maneuvering and power struggles that occur in Lebanon’s cabinet formation process. Much like the children’s game of musical chairs, where participants scramble to find a seat when the music stops, Lebanon’s political leaders engage in a complex and often contentious process to secure key ministerial positions for their respective sectarian groups.
In Lebanon, the power-sharing system is designed to ensure representation for the country’s various religious sects. This system, while intended to promote balance and inclusivity, often leads to political deadlock and inefficiency. The formation of a new cabinet involves intense negotiations and bargaining among political parties, each vying for control over specific ministries that are seen as vital to their interests. Political consensus, or the lack thereof, often serves as a significant barrier to reform in Lebanon. The power-sharing structure ingrained in public administration is an extension of the political power-sharing system. This structure has led to administrative dysfunction in control agencies such as the Central Inspection Board (CIB), which political parties link to the broader power-sharing framework there is a need for reform in the state’s control agencies, as none of these agencies are regarded as independent bodies.
A more direct embodiment of sectarian power-sharing and an obstacle to administrative reform can be seen in quasi-governmental institutions.
The delay in forming Lebanon’s cabinet is significantly undermining President Joseph Aoun’s credibility and stalling the momentum generated by the nomination of Prime Minister Nawaf Salam. The prolonged political deadlock is exacerbating the country’s economic and social crises, leading to widespread public frustration and diminishing confidence in the government’s ability to implement necessary reforms. The pressure from traditional sectarian political groups to include their nominees in the cabinet is further complicating the formation process, casting doubt on the administration’s commitment to establishing a reformist government. This impasse is not only hindering Lebanon’s recovery efforts but also jeopardizing international support, which is crucial for addressing the nation’s financial woes. As the new Prime Minister-designate, Salam faces immense pressure from traditional political factions to include their nominees in his cabinet, particularly for the coveted finance ministry. The stakes are high, and the challenges are formidable. Many observers question whether Salam was set up to fail from the start, given the deep-rooted sectarian interests and external influences at play. His commitment to forming a government free from political party figures and sectarian monopolies is a bold stance, but it remains to be seen if he can navigate the treacherous waters of Lebanese politics and deliver on his promises of reform and independence
High stakes
The inability to swiftly form a government is seen as a failure to break away from the entrenched political practices that have long plagued Lebanon, thereby eroding the trust and hope that the new leadership initially inspired. the main problem with public administration in Lebanon, as in any administration, is unearned entitlement. Despite all political parties agreeing that patronage and clientele employment facilitated by the supply and demand relationship between the political party and the citizen in the public sector is a vital barrier to administrative reform, many claimed they have no choice but to submit to this political reality. Lebanese political parties’ claims that they represent particular sectarian communities render their claims for administrative positions a natural right as opposed to an entitlement to be earned. Inversely, political officials’ accountability for any misconduct related to their public duties in these entitlements is perceived as an attempt to prosecute or exclude the community behind the official from political decisions. As a result, the corporate power-sharing extends into the public sector in the form of sectarian quotas and allocation of entitlement and privileges. The power-sharing system that dominates political life in Lebanon leaves little hope for reform, as political parties have no reason to give up their share in the state’s resources unless they are forced to.
Power sharing seats
Despite all efforts and the nomination of Salam as prime minister, breaking away from entrenched politics in Lebanon remains a formidable challenge. The sectarian power-sharing system is deeply ingrained in the political culture, and many political leaders have vested interests in maintaining the status quo. Additionally, external actors, such as regional powers and international organizations, often influence Lebanon’s political dynamics, further complicating efforts for reform. On Sunday, Hezbollah supporters conducted rallies in Beirut, including in Christian-majority neighborhoods, escalating sectarian tensions. These rallies followed the return of residents, mainly Shi’ites, to southern Lebanon, prior to the official announcement of the ceasefire extension. After trying to return to villages still occupied by Israeli soldiers, dozens of people were shot and killed.
Due to persistent instability, Emirati billionaire Khalaf Ahmad Al Habtoor, head of Dubai conglomerate Al Habtoor Group, announced on X on Tuesday the cancellation of all future investments in Lebanon and plans to divest all his assets there. He added, “The continued dominance of armed militias and the failure to establish rule of law make it impossible for any investor to proceed with confidence in such an environment”
The Minister of finance “dropped stitch”
On the political front, most political parties are pressuring the new Lebanese PM Nawaf Salam to include ministers named by traditional, sectarian political groups, threatening the possibility of building a reformist government. Perhaps the biggest pressure comes from naming the finance minister. Seems that this ministry is always the dropped stitch in any rule of law. The Shiite duo Amal and Hezbollah have lately held this ministry and are insisting on retaining it in this government as well. In addition, according to five sources informed by Reuters, Washington is pressuring senior Lebanese officials to block Hezbollah and its allies from selecting the next finance minister, aiming to reduce the Iran-backed group’s control over the government. It is important to highlight the significance of this ministry, as the finance minister signs off on every new decision involving money, including hiring people for new governmental positions like judges and any new projects in Lebanon that involve financial resources. Giving the finance ministry to Hezbollah and Amal again could cause controversy, as Lebanon aims to start fresh with a president and prime minister who are seen as independent from the old ruling elite, often blamed for the country’s many problems. Lebanon also urgently needs financial support to address an economic crisis that began in 2019 and was worsened by the war between Hezbollah and Israel, which caused billions of dollars in damage. Lebanon risks losing global support if the finance ministry is controlled by Hezbollah and Amal. On Wednesday night, Mr. Salam, after meeting with President Joseph Aoun, emphasized that his government would not be made up of political party figures and stressed that no decisions had been finalized, adding, “no ministry is exclusive to a certain sect and no ministry is prohibited to a certain sect.”
Instability weighs on Finance
Lebanon’s annual inflation rate increased to 18.12% in December 2024, from 15.38% in November 2024, according to the Central Administration of Statistics (CAS). The average decrease in inflation in last year-and-a-half resulted from the increase of dollarization rates by businesses and to the stability of the exchange rate especially since August 2023. Moreover, the continued escalating political and military tensions in the Middle East and its effect on Red Sea sea-shipping traffic still threatens to disrupt supply chains, which could increase shipping costs, and consequently lead to an increase in inflation. However on the financial front The Ministry of Finance recently uncovered during a presentation to the international rating agency Standard and Poor’s (S&P) that Lebanon achieved a surplus of LBP 27 trillion ($300 million) during the year 2024. In details, cash revenues leveled at LBP 366 trillion ($4.1 billion) as a result of improved compliance and collection efforts, outpacing budgeted revenues by 19% notwithstanding the extension of some tax deadlines as a result of the war, while expenditures (including emergency relief to war victims, payments to municipalities, the NSSF and EDL) stood at LBP 340 trillion ($3.8 billion). In addition, the ministry revealed that it resumed local and foreign debt payment in 2024, settling some LBP 28 trillion ($300 million) in domestic obligations and $368 million in external debt in the process, emphasizing in this context on the importance of this step towards restoring international confidence. Finally, the ministry commented that the surpluses achieved during the year 2023 ($364 million) and 2024 were instrumental towards stabilizing the exchange rate and reducing inflation.
The BLOM Bond Index (BBI), which tracks Lebanese government Eurobonds (excluding coupon payments), declined by 4.6% last week to 16.45 points. This drop followed the extension of the ceasefire with Israel until February 18, continued Israeli breaches of the truce agreement, delays in forming a new Lebanese government, political interference aimed at creating a government based on pie-sharing politics, and increased sectarian tensions following Hezbollah supporters’ rallies in Beirut on Sunday.
When bond prices go down, yields go up. Consequently, the yield on 5-year bonds rose by 295 basis points to 92.75%, and the yield on 10-year bonds increased by 250 basis points to 67.5% this week.
On Wednesday, the U.S. Federal Reserve kept interest rates unchanged at 4.25%-4.5%, as anticipated, following three consecutive rate cuts since September 2024. This decision came despite US President Donald Trump’s calls for lower interest rates during his address at the World Economic Forum in Davos, where he subtly referenced the Fed. Policymakers stated they would need to see “real progress on inflation or some weakness in the labor market” before considering further adjustments. From a policy perspective, Trump announced plans to impose 25% tariffs on Mexico and Canada starting February 1, while a 10% tariff on Chinese goods is still under consideration. Markets are now closely monitoring developments concerning these measures. Amid these developments, traders are now pricing in a 16% chance of a quarter-point rate cut at the Federal Reserve’s 29 January meeting, while the likelihood of no change is 84%, according to the CME Group’s FedWatch tool.
Where do we go from here
Breaking away from entrenched politics in Lebanon requires sustained efforts from civil society, political leaders, and the international community. While there have been notable successes, such as the work of LADE and the October 2019 protests, significant challenges remain. To achieve meaningful change, Lebanon must continue to promote democratic practices, increase citizen participation, and address the underlying issues of sectarianism and corruption. Only through a collective and concerted effort can Lebanon hope to build a more inclusive, accountable, and prosperous future. But how canyou convince the junta to drop the musical chairs comedy ??
Maan Barazy is an economist and founder and president of the National Council of Entrepreneurship and Innovation. He tweets @maanbarazy
The views in this story reflect those of the author alone and do not necessarily reflect the beliefs of NOW
