Less than two months before the constitutional deadline for electing a new president for Lebanon, the acute economic and financial crisis that has plagued the country since the fall of 2019 continues unabated. Some hope that the end of President Michel Aoun's term in October and the election of a new president will lead to a new reality, especially if coupled with major internal and external agreements.
The currency crisis, which the responsible authorities have failed to control, impacts all aspects of life in Lebanon, leading to soaring prices and impoverishing more Lebanese citizens, the vast majority of whom still receive their salaries in Lebanese pounds that have lost more than 90 percent of their value. The dollar exchange rate, which was 1,500 pounds to the dollar in 2016 when Aoun was elected, has now ranged between 28,000 and 30,000 pounds. Experts agree on a set of economic and political factors responsible for the collapse, citing the cumulative effects of a corrupt system based on sectarian quotas, as well as unhealthy financial policies that were politically supported and led to the crisis.
Despite this, former Aoun leader, lawyer Antoine Nasrallah, believes that "Aoun bears part of the responsibility for the collapse due to his lack of any plan to manage the crisis and find a way out." He pointed out that Aoun did not have a vision to deal with the new reality after the decision to default on Eurobond payments and had supported a haphazard subsidy policy that depleted the reserves of the Central Bank of Lebanon. Furthermore, Nasrallah noted that Aoun did not have a clear foreign policy, despite having a team of foreign ministers aligned with him.
He stated, “The decree issued recently that allocated financial aid to charitable organizations, as if everything were fine, was clearly based on obvious political patronage, without forgetting the responsibilities borne by Aoun and his political team for not achieving any significant reforms, despite having the two largest parliamentary and ministerial blocs and obstructing the formation of the government multiple times not due to political disagreements but rather due to disputes over quotas.” He continued, “Before his election, General Aoun would say: 'Elect me, and I will work hard while you relax,' but what happened was the complete opposite.”
While the crisis exploded in 2019 after the popular uprising on October 17, experts affirm that its sparks had been evident long before. Dr. Layal Mansour, a researcher in economic and financial matters and a university professor, stated that "all economic and financial analysts were aware that Lebanon was heading towards a major economic crisis; even an ordinary citizen following the reports of the IMF and the World Bank understood we were reaching our current state."
She referenced several indicators that confirmed Lebanon was nearing its end, mainly the high interest rates on bank deposits which reached 16 percent, indicating that the country's situation was bad and unstable. Additionally, the reserves of dollars in relation to foreign deposits suggested an abnormal situation since the reserves were not net and consisted of debts. She emphasized that every World Bank report warned of a collapse if reforms were not pursued, noting that 50 percent of the state’s debt was owed to banks— a phenomenon typically observed in some of the poorest countries.
Mansour considers the financial structures established in 2016 as the initial sign that triggered the crisis, where those responsible for the financial situation tried to provide expensive artificial oxygen shots to the country. Worryingly, Mansour emphasized that the actual collapse has not yet begun, indicating, "We are still in the appetizer stage." She added, "The real collapse will begin when the fate of deposits is acknowledged. The crisis is severe and intense, and the exchange rate crisis is unlike any other; it cannot be resolved in isolation."
Unfortunately, it is expected that Lebanon will rely on foreign funds and loans for years to come, leading to the gradual disappearance of the middle class. Lebanon is experiencing an unprecedented economic collapse classified by the World Bank as one of the worst worldwide since the mid-20th century, along with the disintegration of the main pillars of the prevailing political economy model in the country since the end of the civil war, primarily reflected in the collapse of essential public services.
Approximately 80 percent of Lebanese people have fallen below the poverty line as the crisis has worsened. According to a recent report by United Nations special rapporteur on extreme poverty and human rights Olivier De Schutter regarding Lebanon, "nine out of ten people find it difficult to secure an income, and more than six out of ten would leave the country if they could."
The official unemployment rate in Lebanon has nearly tripled due to the ongoing economic collapse, according to a new survey conducted by the Lebanese government and the United Nations, with results released recently. The Central Administration of Statistics in Lebanon and the International Labour Organization indicated that the unemployment rate rose from 11.4 percent during 2018-2019 to 29.6 percent in January.
All of the above has inevitably resulted in a rise in migration. According to "International Information," the number of migrants and travelers reached 79,134 people in 2021 compared to 17,721 in 2020, an increase of 61,413 people, or 346 percent.
As the crisis has escalated, accessing basic goods in the country has become difficult, either due to their soaring prices or their scarcity in the market. For example, the price of a canister of gasoline has risen from 30,000 pounds to 675,000 pounds, a loaf of bread from 1,500 pounds to 13,000 pounds, a kilo of sugar from 1,500 pounds to 35,000 pounds, and a kilo of meat from 17,000 pounds to 300,000 pounds. The food basket containing essential items that no family can do without — sufficient for less than a month — now costs about one and a half million pounds, compared to less than 100,000 pounds before the crisis.
The hell of the Lebanese people is not limited to the aforementioned issues but is fundamentally based on the collapse of public services due to dwindling funds and reserves. The loss of fuel has resulted in continuous power outages, with electricity supply often limited to one hour within a 24-hour period, affecting all other services, including water and communication, as well as all sectors facing existential crises.
Financial and economic expert Walid Abu Sleiman points out that "it is unnatural for the situation to flip upside down in three years, but it’s not impossible either, as our economy is small in size and it’s possible to register rapid growth if we implement the necessary reforms." He noted, "Returning to levels where GDP is at $50 billion and above requires more than three years, given that adhering to the aforementioned reforms will allow us to record a budget surplus, potentially leading to prosperity, thus boosting growth and increasing state revenues."
Abu Sleiman cites notable models and experiences, particularly Cyprus, which faced a crisis in 2013 but managed to exit its plight in 2017 and entered global markets to borrow at very low-interest rates due to its commitment to the required reforms, whether in the banking sector or the economy in general.
He emphasizes that "there is no way out of the current crisis except through implementing a recovery plan and restructuring at the level of public administrations, especially the Electricity of Lebanon and other facilities that can secure resources for the treasury, and restructuring public debt and the central bank, as well as commercial banks." He warns that "if the situation continues as it is without any radical reform measures, the situation will worsen after the poverty rate exceeds 85 percent, leading to a potential social explosion."
