Lebanon, Reflections of a Humanitarian Blog
The Lebanese Civil War, a protracted conflict from 1975 to 1990, left Lebanon in ruins, necessitating significant economic reforms. As part of these reforms, Lebanon’s central bank opted to peg the country’s currency to the US Dollar, promising a fixed rate of 1,507 Lebanese lira to $1, with a commitment to seamless currency exchange through local banks. However, this well-intentioned move backfired. Initially, banks accumulated US Dollars, which seemed stable.
This stability proved short-lived. In 2011, the US Dollar began to falter. In a bid to attract more deposits, Lebanese banks offered exorbitant interest rates to depositors. This practice evolved into a financial scheme resembling a Ponzi scheme, as newer deposits were used to pay the promised high interest rates to earlier depositors, creating an unsustainable cycle.
As concerns mounted, depositors rushed to withdraw their savings. However, stringent restrictions prevented them from accessing their funds, leading to a crisis of trust. Consequently, the Lebanese lira’s value plummeted by over 90%, resulting in hyperinflation. Basic goods became unaffordable, pushing Lebanon into a severe economic and financial crisis.
Lebanon is currently fighting one of the most severe crises in its history, as per the World Bank’s assessment, ranking among the top three global crises since the mid-nineteenth century. This economic catastrophe is characterized by a staggering decline in GDP, plummeting from US $55 billion in 2018 to a mere $20.5 billion in 2021.
Several factors have contributed to this dire situation, with the COVID-19 pandemic playing a significant role. Like many nations, Lebanon’s economy was severely impacted by the pandemic. The country heavily relies on income from its tourism industry, serving as a primary destination in the Middle East. However, when the pandemic struck, travel restrictions and border closures brought this vital source of revenue to a screeching halt. This sudden loss of income exacerbated the country’s pre-existing vulnerabilities.
Lebanon already grappled with stark wealth disparities, and the instability caused by the pandemic laid bare these inequalities. Approximately one-third of the Lebanese population lives below the poverty line, reflecting the dire socio-economic conditions faced by a significant portion of the citizenry. The youth unemployment rate is alarmingly high at 37%, while overall unemployment stands at 25%, further exacerbating the economic turmoil and contributing to widespread frustration and despair.
However, this stability proved short-lived. In 2011, the US Dollar began to falter. In a bid to attract more deposits, Lebanese banks offered exorbitant interest rates to depositors. This practice evolved into a financial scheme resembling a Ponzi scheme, as newer deposits were used to pay the promised high interest rates to earlier depositors, creating an unsustainable cycle.
As concerns mounted, depositors rushed to withdraw their savings. However, strict restrictions prevented them from accessing their funds, leading to a crisis of trust. Consequently, the Lebanese lira’s value plummeted by over 90%, resulting in hyperinflation. Basic goods became unaffordable, pushing Lebanon into a severe economic and financial crisis.
Along with the pandemic, the Lebanese economy suffered greatly due to the Port of Beirut Explosion in 2020, which killed 200 people and also caused a great deal of property damage. It not only caused structural instability, but also dwindled the water supply, and increased the deteriorating conditions in the country. There was billions of dollars’ worth of damage from this explosion. Due to this shortage of money, people are unable to pay their importers in cash. This has led to a number of strikes specifically with food suppliers and gas stations because wheat and fuel importers cannot get their money. Also, with the influx of Syrian refugees due to the unrest in Syria, it seems as if Lebanon has reached its breaking point and was never able to build back after their Civil War because frankly the country itself has never gotten a break.
In order to attempt to help gain money back, the government imposed a tax on WhatsApp calls, an app that lets one call or text whoever one may choose in any part of the world, for no charge. This $6 monthly tax angered people and led to government protests. The government soon cancelled this tax, but this once again exposed the instability of the country.
Due to the pandemic, the Beirut explosion, and inflation, Lebanon’s economy is in deep trouble. The citizens of Lebanon are in deep trouble considering the economic position of their country. This is a humanitarian crisis that the public needs to be educated on for the sake of humankind.
