Lebanon First President Since 2022 in Wake of War

(Bloomberg) — Lebanese lawmakers will attempt to elect a Lebanon First President in more than two years this week, with army commander Joseph Aoun one of the two main candidates to lead a country battered by months of war and years of economic crisis.

Aoun, who has the backing of the US, partly because  of the Lebanese military’s crucial position in maintaining a ceasefire between Hezbollah and Lebanon, will be challenged by International Monetary Fund Middle East Director Jihad Azour, a former finance minister. The winner will need the votes of roughly two-thirds of parliament.

Choosing a president’s key to reconstruction efforts and enacting reforms needed to recover from a financial crisis.

The election scheduled for Thursday is Lebanon’s latest bid to elect a leader after several failed attempts since Michel Aoun, no relation of Joseph, stepped down at the end of his term in 2022. Since then the country has operated without a formal government, exacerbating a financial crisis that saw Lebanon default on $30 billion of Eurobonds five years ago.

The likelihood of a president being voted through on this occasion has increased due to the recent conflict between Israel and Hezbollah, a Lebanese militia and political party that holds significant sway in parliament. The Iran-backed group, designated a terrorist organization by the US, suffered heavy losses in more than two months of bombardment by the Israeli military, which killed its longstanding chief Hassan Nasrallah and several other leaders.

When a vote was held last year, Hezbollah and its allies fielded their own candidate, Suleiman Franjieh, a former lawmaker and one-time associate of deposed Syrian President Bashar al-Assad. That thwarted the run of IMF official Azour. Talks are underway this time to persuade the weakened group to vote for either of the two main candidates.

Lebanon’s defaulted sovereign dollar bonds climbed for a fifth day on Wednesday on investor optimism that a candidate will be picked this time. That extended their rally in the early days of 2025 to 15%, the most among emerging-market peers. The advances build on a 114% return to bondholders last year, also the biggest in the asset class.

The election “could be a critical first step towards addressing the country’s urgent economic and social challenges,” Goldman Sachs analyst Farouk Soussa said in a note on Wednesday. “We are cautiously optimistic that tomorrow’s vote can lead to the emergence of a successful candidate and to the end of the presidential vacuum.”

The Israel-Hezbollah conflict displaced 1.2 million people in Lebanon and killed at least 3,000 others, including children, while wiping out a large portion of Hezbollah’s stock of weapons. A ceasefire agreement in late November stipulated the deployment of the US-backed Lebanese army in the southern region alongside United Nations peacekeepers, with the aim of keeping the border with Israel free of Hezbollah fighters.

US envoy Amos Hochstein, who helped broker the truce, was in Lebanon this week to follow up on the deal and the upcoming presidential election. He arrived a day after a delegation from Saudi Arabia, the first of its kind in years, which held talks regarding the presidency.

French President Emmanuel Macron’s envoy, Jean-Yves Le Drian, is also in Beirut and will likely meet with lawmakers including Hezbollah parliamentarians. The flurry of visits demonstrate a shift in the balance of power in the country, with the influence of Hezbollah weakened and, in turn, Iran.

The election of a new Lebanon First President would pave the way for the formation of a new government, which would then oversee the implementation of UN resolutions to keep the southern region free of militants, including Hezbollah fighters.

A new administration would also be able to implement reforms needed to unlock an IMF deal signed more than two years ago, which would release billions of dollars to help with reconstruction. Much of southern Beirut was destroyed in last year’s barrage of Israeli rocket fire.

Lebanon has yet to discuss restructuring its debt with bondholders after the 2020 default, nor consolidate a banking sector that was hit hard by the crisis.

(Updates with more comments from Goldman Sachs.)

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