Lebanon’s long road to recovery amid financial implosion


(MENAFN-Gulf Times)

According to the World Bank, Lebanon is facing one of the worst economic and financial crises in the last 150 years.
The bank has classified Lebanon’s economic meltdown as a “willful depression” because of “persistent political inaction” and “persistent and debilitating internal political discord.”
Lebanon‘s three-year financial crisis has now plunged an estimated three-quarters of the population into poverty, and food prices have risen more than 11-fold.
Gross domestic product plummeted from about $55 billion in 2018 to an estimated $20.5 billion in 2021, according to the World Bank, the kind of contraction usually associated with wars.
The Lebanese pound has lost more than 90% of its value, driving up the cost of almost everything in an import-dependent country and destroying purchasing power.
Poverty rates are skyrocketing among the population of about 6.5 million people, with about 80% of people classed as poor, UN agency ESCWA says.
Last September, more than half of families had at least one child who skipped a meal, Unicef ​​said, compared with just over a third in April 2021.
Lebanon’s financial system has suffered massive losses. The government estimates the total damage at around $70 billion.
The banks are also paralyzed.
Savers were banned from US dollar accounts. Withdrawals in local currency are subject to exchange rates that wipe out up to 80% of the value.
Lebanon is dependent on imported fuel and faces an acute energy crisis. Even before the crisis, electricity was scarce, even in the capital.
Lebanese have emigrated in the largest exodus since the civil war. Many believe their life savings are gone and have no plans to return.
A 2021 Gallup poll found a record 63% of respondents wanting to leave the company permanently, up from 26% before the crisis.
According to the World Health Organization, most hospitals are at 50% capacity. Around 40% of doctors, mostly specialists, and 30% of nursing staff have emigrated permanently or work part-time abroad.
More broadly, the mounting debt accumulated by successive governments over the decades is the main cause of Lebanon’s economic collapse.
But the current crisis began in late 2019 after the government announced new proposed taxes, including a $6 monthly fee for using WhatsApp voice calls.
The measures unleashed a long-simmering anger against the ruling class and months of mass protests.
In March 2020, Lebanon defaulted on repaying its massive debt, which at the time was about $90 billion or 170% of GDP – one of the highest in the world.
Officials and media are talking about Lebanon becoming a “failed state”. President Michel Aoun warned last December that the state was “crumbling”.
Certainly, Lebanon faces major challenges in forming a new government amid the country’s devastating financial crisis.
A deal with the International Monetary Fund is widely seen as the only way for Lebanon to start rebuilding the economy, strengthen governance and transparency, and find a way out of financial and economic collapse, its most destabilizing crisis since the 1975 civil war -90 .
The government struck a staff agreement with the IMF in April pledging $3 billion in funding over four years to help the country recover from the meltdown.
A full deal is conditional on Lebanon implementing a range of measures, including beginning the restructuring of its banks, which have locked out the majority of depositors from their hard currency savings since the 2019 financial implosion.


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