In order to end an eight-month crisis over uncollected garbage in Beirut, Lebanon announced last month that it will temporarily reopen a site and set up two new sites. According to officials, the trash solution solves the problem for the next four years while a permanent solution can be found. The waste disposal crisis began last July upon expiration of the contract of the private company that had been collecting and disposing waste in the area for 17 years. As rubbish piled up, anti-government protests increased and even turned violent in the fall. Also last month, despite the solution, protests still continued.

Impact on country risk

The solution is good news for Lebanon. The country has been in a political stalemate since May 2014 as the vacancy for president is still not filled due to differences between the pro-Iranian Shia-dominated 8 March coalition and the pro-Saudi Sunni-dominated 14 March coalition in the Lebanese government. The garbage crisis was a result of this political standstill as the government was unable to replace the previous company, which was linked to the 14 March coalition, due to the political nature of the contract. The solution is especially welcome after Sunni-Shia regional tensions increased in the beginning of the year, resulting in Saudi Arabia halting USD 4 billion in military aid and Gulf States warning their nationals not to travel to Lebanon.  Further escalation of the regional tensions can harm the Lebanese economy which is already severely affected by the Syrian crisis. Indeed, the economy is struggling with sluggish economic growth (2% in 2015) a high current account and fiscal deficit (resp. -22% and -10% of GDP in 2015), while it has a huge public debt (132% of GDP in 2015). Analyst: Jolyn Debuysscher, j.debuysscher@credendogroup.com