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What’s Happening in Lebanon: Financial Meltdown

 

Since 2019, Lebanon has been experiencing an extreme financial collapse. Now, in 2021, the financial collapse has evolved into a complete economic crisis. After the Lebanese civil war (1975-1990), the government continuously piled up debt in their mission to rebuild the nation and what was once an honest vision “was derailed by corruption and mismanagement as a sectarian elite borrowed with few restraints.” As downtown Beirut rose with skyscrapers and shopping malls, Lebanon’s debt rose as well with Lebanon acquiring debt equal to 150% of its national output


Lebanon’s financial system has been described by various economists “as a nationally regulated Ponzi scheme” because money is borrowed to pay already existing creditors, however, this plan does not work out well when the borrowing options run out. Initially, after the civil war, Lebanon was able to stabalize its finances through tourism,  foreign aid, and earnings from its own financial industry. However, one of the best sources of income was money received from the millions of Lebanese who went abroad to work. As this income began to slow, it left Lebanon's sectarian squabbling and ultimately leading the country into financial shambles. In 2018, when the point came where Lebanon should’ve reined in on its spending, the government did the opposite as politicians splurged on a public sector pay raise before the election that year. 


Finally, everything came to a head in 2019 when Lebanon constructed a plan to tax WhatsApp calls— the method through which many kept in touch with relatives. As anyone can predict, this led to social uproar resulting in protest, known as the 17 October Revolution, against the political elite of which many were warlords who thrived while the rest of the country struggled. Eventually, foreign aid was no longer received and banks no longer had enough dollars causing them to shut their doors. The Lebanese currency collapsed, and since 2019, it has lost up to 90% of its value. Whereas $1 USD was equivalent to 1,500 Lebanese pounds, that number skyrocketed to as much as 15,000 pounds in June 2021. 


As the economic crisis reigns over Lebanon, there has been a massive negative impact on its citizens in the form of widespread poverty. The United Nations(UN) estimates that 78% (3 million people) of the Lebanese population live below the poverty line and 36% live in extreme poverty. By the end of last year, the UN reports about a quarter of the population was unable to meet their nutritional needs. United Nations Resident and Humanitarian Coordinator for Lebanon Najat Rochdi says:


 “The situation remains a living nightmare for ordinary people, causing unspeakable suffering and distress for the most vulnerable...Starvation has become a growing reality for thousands of people...Today, we estimate that more than one million Lebanese need relief assistance to cover their basic needs, including food.”


Additionally, the economic crisis has led to a shortage of fuel, causing large-scale power outages. This has led to other issues such as hot unfavorable living conditions in which citizens are unable to have air conditioning which is extremely dangerous to those such as the elderly. Furthermore, lack of power in hospitals has proven dangerous to the patients within them. Speaking of hospitals, important medicines, such as cancer treatments, are also in short supply. Many are not fortunate enough to afford the hyper-inflated rates on the black market. This, among other issues, torment many citizens in Lebanon. 


As of October 2021, Lebanon and the International Monetary Fund (IMF) are planning technical discussions to combat the country’s economic crisis. Lebanon’s newest Prime Minister, Najib Mikati, has expressed interest in a Fund program. Mikati’s cabinet is Lebanon’s first fully established government in over a year and even though negotiations between the country and IMF were not successful in 2020, hopefully, there is a better outcome this time around that begins to make actual strides toward a better future for the citizens of Lebanon. 


In the meantime, there are various ways you can aid Lebanon throughout its financial crisis. This includes donating to aid organizations and food banks, signing petitions, and continuously sharing resources. You can find more detailed resources on where to donate and petitions to sign here. This is not just a Lebanese issue, it’s a humanitarian issue which makes it all of our issue. As governments continuously let their citizens down, we must come together to speak up and help out. 

Feature Image Via 

Andre Taissin

Sources: 

https://www.reuters.com/world/middle-east/lebanons-financial-meltdown-how-it-happened-2021-06-17/

https://www.dw.com/en/lebanon-dollars-shield-some-from-hyperinflation-crisis/a-58843383

https://www.dw.com/en/lebanon-life-without-gas-and-electricity/g-58992788

https://www.aljazeera.com/news/2021/10/1/un-lebanon-reforms-extreme-poverty-economic-crisis

https://www.aljazeera.com/news/2021/10/4/lebanon-and-imf-to-resume-technical-talk

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