Many Arab countries have been facing great economic and financial challenges for a while — some related to the decline of their national currencies amid the pandemic’s negative impacts on economic and social conditions. Today, Lebanon is one of these countries where its population suffers from sectarian conflicts, economic and financial challenges, as well as inflationary trends impacting the value of goods, products and services. This country has a number of promising sectors, including agricultural, industrial, food and service goods, not to mention its financial and banking capabilities, in addition to its unique tourist appeal.
The challenges facing Lebanon today led the World Bank to issue a statement warning that the economic crisis is one of the worst that Lebanon has experienced since the 1950s, effectively threatening its long-term stability. This statement agrees with the views of most Lebanese who see the crisis as the result of Lebanon’s elite’s appropriation of state’s resources for a long time.
Customers are even unable to retrieve their own bank deposits.
Indeed, the crisis continues to worsen the economic and social conditions of the people on a daily basis. According to a World Bank report, Lebanese government revenues fell by nearly half last year in 2021 to 6.6 per cent of GDP, which was the third lowest in the world after Somalia and Yemen.
The economic crisis in Lebanon has worsened since 2019 for several reasons, including mismanagement of spending that led to a rise in the country’s sovereign debt, in addition to political differences between competing factions, the country’s delay in forming the national government, and the decline in Arab support for Lebanon.
The World Bank report estimates that Lebanon's real GDP declined by 10.5 per cent, raising the total debt to 183 per cent of GDP last year. This means that Lebanon is heading towards more economic pain and social distress at a time when the pandemic continues to ravage the country.
Amid this grim backdrop, we see that the Lebanese pound has lost much of its value, dropping to one US dollar on the black market to more than 25 thousand pounds sometimes. This greatly affects the weak and poor, reducing their savings to nearly worthless paper. These conditions have led to popular discontent, demonstrations, clashes and protests because they have been affected by the local currency as a result of the decline in its purchasing power, making it near impossible to cover their daily needs.
There are many Lebanese who attribute this downward spiral to the absence of economic reforms, rampant corruption among successive governments, theft of public monies, and US sanctions on some parties and certain Lebanese banks, at a time when the Lebanese are unable to withdraw their savings that they built over the past years.
haiderdawood@hotmail.com
The author is a Muscat-based economic analyst who previously worked for the Central Bank of Oman and Oman Chamber of Commerce and Industry
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