January 7, 2022

The Lebanese Economic Crisis

In 2019, Lebanon’s economy crashed and it has not recovered since. There is a shortage of many necessities such as food, fuel, electricity, and money. There is currently an ongoing humanitarian crisis that people are not being educated on, and most don’t know even exists. 

The Lebanese Civil War began in 1975 and lasted until 1990. When this war ended, it was decided that the country needed to change its currency and tie it to the US Dollar. “Lebanon’s central bank promised that 1,507 Lebanese lira would be worth exactly $1 and that Lebanese banks would always exchange one for the other.” However, this didn’t work as it was intended to: Lebanon’s banks ended up storing US currency which was stable for a bit, but ended up crashing in 2011. In order to keep money coming in, banks offered generous interest rates to anyone who would keep depositing money. This turned into a “Ponzi Scheme,” and people wanted to pull their money out, but were unable to. Now the value of the lira has gone down by over 90%.

This crisis, according to the World Bank, “is in the top 3 most severe crises globally since the mid-nineteenth century.” Their GDP dropped from US $55 billion in 2018 to $20.5 billion in 2021. There are multiple reasons as to why the crisis has gotten this dire, and one of them is because of the Covid-19 pandemic. Like most countries, Covid-19 hit the economy hard. Lebanon receives a lot of income from the tourist industry, being a main place to visit the Middle East. However, once the pandemic hit and travel was halted they lost this main source of income. This instability caused by the pandemic has led to unstable living conditions for millions of Lebanese people whose disparities were only more evident since the country already faced unequal wealth gaps. 1/3 of the Lebanese population live under the poverty line, while the youth unemployment rate is 37% and the overall unemployment rate is 25%.

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.

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