How A WhatsApp Tax Led To The Ouster Of Lebanon’s Leader

A tax on using WhatsApp became the final straw for the residents of Lebanon, and it cost the country’s leader his job.

Earlier this month, seething protestors took to the streets after the government said it would impose a 20% on the first WhatsApp call users made every day.

It doesn’t matter that the tax quickly got reversed. The government’s actions opened the flood-gates of accumulated wrath, leading to what analysts are calling “unprecedented” protests.

“[The WhatsApp move] taps into a deep-rooted dissatisfaction,” states a recent report from Washington DC-based think tank the Institute of International Finance. 

Ultimately, the two weeks of protests led to Tuesday’s resignation of Prime Minister Saad Hariri.

If the WhatsApp tax occurred in the U.S., it would get seen as a minor political snafu. But in Lebanon, it was just one mess too many for the people who have suffered economic indignity at the hands of a seemingly out of touch elite.

The country’s problems are legion. First, it has the highest number of refugees per capita in the world – around one-in-four of the country’s residents. The vast majority fled the war in Syria.

Then there is the economic mismanagement, according to IIF:

• “The governing system, which allocates power among feuding sectarian groups, has become so inefficient and corrupt that it struggles massively to provide even basic public services such as trash removal and provision of electricity.”

In other words, providing the simplest things that many people would take for granted is beyond the ability of the Lebanese government. That situation may get worse for a while because the country is now leaderless.

A significant part of the shortfall in services must fall at the door of the Iranian-back Hezbollah party, which forms part of the government, according to a recent report from The Free Iranian.

Another deep problem for Lebanon is that corruption runs deep. It is so bad that it makes other countries in the region look good. For instance, Lebanon gets seen as more corrupt than the bribe-filled countries of Iran or Egypt, according to World Bank data cited in the IIF report.

The result of the failure of the elites to govern effectively is that Lebanon is drowning in debt, with government loans now totaling around 150% of GDP. It is a problem that is alarming the investment community.

The country’s debt now trades at around 62 cents on the dollar, versus over 95 cents two years ago. When the price of debt drops borrowing costs go up reflecting the increased risks that lenders won’t get paid.

What’s needed is not a WhatsApp tax but rather an IMF bailout, according to the IIF report.

The good news is that the current crisis may help prompt the necessary action by the international community and result in better economic management in Beirut.