CONTEMPORARY EURASIA IX ( 1 )
in 1993 eventually pegged the currency to the US dollar by , at times , borrowing more on the belief of the government than was needed to finance the government deficit . This scheme drove up the demand for Lebanese pounds , but also raised interest rates on government debt , leading the country into a debt trap . 66 The main beneficiaries were Lebanese commercial banks and their depositors . Lebanese pound deposits are highly concentrated because only the country ’ s financial and economic elites had the necessary savings to invest in government debt instruments in this way . 67 The government therefore needs to maintain the confidence of the country ’ s financial elites and one way of doing so is to appoint one of the new businessmen as finance minister . A second political aspect of debt management is mentioned in an International Monetary Fund ( IMF ) working paper from 2008 , which shows that the continuous rollover of Lebanese government debt depends on an “ implicit guarantee ” from donors and international financial institutions . 68 In this context , the main guarantor is Saudi Arabia . The kingdom bought up government bonds when investors refused to take them anymore , it provided the largest chunk of concessionary loans at the “ Paris II ” donor conference that prevented a financial crisis in Lebanon in 2002 and it transferred 1 billion USD to the Lebanese central bank during Israel ’ s war with Hezbollah in 2006 . 69 Therefore , the government needed someone who could manage relations with the Saudi monarchy . Safadi ticked both boxes . As a new businessman , Safadi reassured Lebanon ’ s financial elites – the owners of banks and holders of deposits – and his close relations with the Saudi royals meant that the “ implicit guarantee ” would be maintained .
The most important issue of continuity between Saad Hariri and Najib Mikati was over funding for the STL . Though the court consisted of international jurists and Lebanese judges , the Lebanese government withheld its share of the funding . Mikati threatened to resign over the STL funding issue and eventually paid the government ’ s dues in December 2011 . There are several reasons . 1 . Mikati argued that he wanted to fund the tribunal in order to avoid possible international sanctions against Lebanon . 2 . Mikati could not be seen as going against his own community , where most felt strongly about the STL and regarded the assassination of Rafik Hariri as an attack on the Lebanese Sunni community . 3 . Saudi Arabia was pressing for the STL and very few Sunni politicians in Lebanon can defy Saudi pressure .
66
See Gaspard Toufic , A political Economy of Lebanon , 1948-2002 : The Limits of Laissez-Faire , ( Leiden : Brill , 2004 ).
67
Bassam Fattouh , “ A Political Analysis of Budget Deficits in Lebanon ”, SOAS Economic Digest , June 2 , 1997 .
68
See Axel Schimmelpfennig , Edward Gardner , Lebanon-Weathering the Perfect Storms , Washington : IMF , 2008 , 19 .
69
Ibid , 5 . 22