According to the World Bank, Lebanon’s economic and financial crisis can be ranked among the top three most severe economic crises since the mid-19th century.
What’s going on?
Lebanon’s crisis is largely a result of decades of corruption, waste and mismanagement, with previous governments having spent a lot of money, leaving the country deeply in debt.
But where did it go wrong?
After the civil war, Lebanon balanced its books with tourism receipts, foreign aid, earnings from its financial industry and money given from Gulf Arab states, which bankrolled the state by strengthening central bank reserves.
It was doing well. But then…
The central bank introduced “financial engineering”. This meant that banks were offered high returns for new dollars. There was also a rise in liabilities.
Meanwhile, the cost of servicing Lebanon’s debt became about a third or more of budget spending.
WHAT TRIGGERED THE COLLAPSE?
When the state needed to rein in spending, politicians started to pour money into the public sector pay rise before the 2018 election. And the government’s failure to deliver reforms meant foreign donors held back billions of dollars in aid they had pledged.
The final spark came in October 2019 with a plan to tax WhatsApp calls. Mass protests, driven by Lebanese youth demanding wholesale change, erupted against a political elite, many of them aging warlords who thrived while others struggled.
Foreign exchange inflows dried up and dollars exited Lebanon. Banks no longer had enough dollars to pay depositors queuing outside, so they shut their doors.
The currency collapsed.
And the explosion last year at Beirut port killed about 190 people and caused billions of dollars of damage.
How You Can Help.
In our previous post, we talked about 3 ways you can help (1) share information (2) amplify Lebanese voices (3) donate.
Another way you can help is by HIRING LEBANESE & SUPPORTING LEBANESE OWNED BUSINESSES
When you hire a Lebanese person who is currently residing in Lebanon, you are helping stimulate the economy.
When you support Lebanese owned businesses, who have ties back “home”, then you’re helping stimulate the economy.
Lebanon is one of the largest remittance-receiving countries in the world, with remittances surpassing financial inflows from both exports of goods and services and foreign direct investments over the past decade.
Remittances from expats to Lebanon totalled $1.57 billion in the first quarter of 2020, the lowest quarterly level for nearly 13 years.