Lebanon was once called the “Paris of the middle east”. It was a holiday destination because of its rich culture, tradition, food and the beauty of the country. Lebanon is now battling one of the worst economic crises that have ever happened in 150 years. The 1975–1990 civil war heavily damaged Lebanon's economic infrastructure. Until 2006, Lebanon experienced economic stability. The economy then fell into depression during 2007-2008 due to a mortgage lending crisis which led to a global banking crisis along with the failure of Lehman Brothers. Lebanon has a very high level of public debt and large external financing needs. Lebanon’s main source of income was tax. Its debt to GDP ratio remains one of the highest in the world.
In 2019, the liquidity crisis shot so high that people had to start protesting as they did not have any minimum standard of living. Everyone’s life savings were frozen in bank accounts and people couldn’t access them anymore. Lebanese Lira is dropping against US Dollars. Prices of commodities have increased to more than 400%. Currently, $1 is 0.00066 Lira as of August 21, 2021 (exchange rate keeps on fluctuating). As the cash in the banks are in dollars and cannot be accessed, there are different exchange rates i.e., official rate, bank rate and black-market rate. The black market rate changes every hour as the demand is high due to comparatively lower interest rates. With the outbreak of the Covid-19 pandemic, the global economy has dropped drastically and the Lebanon economy has plunged. The Beirut Explosion on August 4, 2020, and the recent explosion on August 8, 2021, worsened the financial conditions in Lebanon even more. Even the injured were not able to get treatment in hospitals because of no fuel and money. Patients are being airlifted by fellow middle eastern countries for treatments.
Currently, as of 2021, the population is unemployed and has no money. As a result, they live depending on financial aid given to the country. Students are dropping out of colleges to earn and help their families as most of them in Lebanon are below the poverty line. There is no currency cap in the country and hyperinflation has increased at a very high rate. One of the other reasons for hyperinflation is the black market rate. The currency has devalued by more than 85%. Adding to this banking crisis, the Covid-19 pandemic and Beirut explosion which happened twice resulted in homelessness and unemployment. This catastrophe led people into depression and old people into helplessness as they lost all of their retirement savings. Currently, there is no government, no money and no economy in Lebanon. People of Lebanon can’t even migrate to another country as they lost all of their life savings.
The minimum wage in Lebanon was $450 per month and today it’s less than $30 per month which is $1 per day(Minimumwage.org, 2021). The crisis has only worsened recently with growing shortages such as power loss. As part of Lebanon’s wider financial meltdown, the steadily worsening fuel crisis has hit a crunch point, with hospitals, bakeries and many businesses scaling back operations or shutting down completely as fuel runs dry. Even at home, there is no food and water. The government is lifting subsidies that have been protecting the Lebanese population from the impact of an economic crisis, saying that subsidies have been exploited by businesses. Since the state provides inadequate electricity, many areas in Lebanon are reliant on diesel which is used to run backup generators. With diesel being no longer accessible, many areas have plunged into darkness, no transportation as a result, no water, no business, schools etc. People who lived luxurious life can’t even afford to buy bread and water to survive. Suicides have been increasing. More than 50% of the population is in or below poverty.
There is little to no hope towards an improvement in the economy because of government mismanagement, corruption and monopolism. The government’s irresponsibility led the ordinary people into a huge financial crisis. Hyperinflation, depreciating exchange rates and many other financial issues are not being solved due to the corrupt government rather being worsened by them. When the population had enough of this financial oppression by the government, they started protesting and the government reacted by resigning. The government is now negotiating a multibillion bailout from the IMF.
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ABOUT THE AUTHOR
Hiba Abdul Salam is a 2nd year Economics student studying in Maitreyi College, University of Delhi. Her interests are public policy, international relations, peace studies and environmental science.
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