Explaining Lebanon’s Economic Crisis Today

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TACOMA, Washington — For the past 18 months, Lebanon has been engulfed in turmoil. From the devastating Beirut explosion in August 2020 to the outbreak of COVID-19, Lebanon’s already unstable infrastructure has been overwhelmed by crises. As one would expect, Lebanon’s economic crisis has caused Lebanese society to deteriorate into chaos. Now, the Lebanese people are enduring what is being described as one of the “worst economic disasters since the mid-19th century.” Today, 50% of the population now lives below the poverty line. Additionally, four million people are at risk of losing access to clean water. “A loss of access to the public water supply could force households to make extremely difficult decisions regarding their basic water, sanitation and hygiene needs,” said Yukie Mokuo, UNICEF’s representative in Lebanon.

Corporate Corruption

Exacerbating the impending water shortage is an equally worrying fuel shortage that has already done significant damage to the economy. On top of no internet connection in a large portion of the country, Lebanese businesses, from hospitals to bakeries, have been crippled. From essential medicine to basic goods, it is now nearly impossible to find necessary items for daily life. Liberties many people take for granted, such as putting food in a refrigerator or even taking a daily shower, have become impossible for large sections of the Lebanese population. Many Lebanese citizens now worry that the country is “unlivable.”

The Borgen Project spoke with Simon Massih, a Lebanese citizen who recently immigrated to the United States. He elaborated on Lebanon’s economic crisis. According to Massih, “While corruption has always existed in Lebanon, its effects have never been on this large of a scale. Now, the basic needs that you need for survival — they’re just not there.” Expectedly, the import-dependent country is experiencing record-high levels of inflation. Without money being invested into local industries, Lebanon’s economic future could be grim.

While there are reports that parliament has approved a ration card system that would give approximately 500,000 impoverished families around $93 a month for one year, there is nothing that details how it will finance this supposed $556 million project. Additionally, the World Bank has reported that Lebanon’s GDP has been reduced by nearly 40%, adding that “such a brutal and rapid contraction is usually associated with conflicts or wars.”

Political Corruption

One may wonder how Lebanon has found itself in such a dismal economic, political and humanitarian crisis. The answer is decades of rampant corruption by a network of virtually untouchable political elites. Massih says that “all the Lebanese people want is stability, of course. However, stability will never be achieved with the current leaders.”

The Lebanese people have not been granted stability yet. Massih states this is because of corrupt politicians that have forcefully embedded themselves into the nation’s political infrastructure. “The younger politicians are not even being given a chance to have a voice. Simply, the old guys have blocked them out. They know the system inside and out, and they cater to foreign entities that will support them, whether it be financially, militarily [or other].” As a result, four out of every 10 Lebanese are out of work.

Hezbollah

With little to no state-sanctioned economic infrastructure, Hezbollah’s black market economy has prevailed. Backed and funded by Iran, the hybrid terrorist organization of Hezbollah has grown during Lebanon’s economic crisis. Controlling nearly half of Lebanon’s territory, Hezbollah’s underground economy and political endeavors have played a major role in the ever-growing illegitimacy of the Lebanese state. Unfortunately, there is no sign of its grip loosening.

When asked if he thinks a legitimate economy could ever overtake Hezbollah’s black market, Massih responded with a resounding “No. Hezbollah’s operations are tied to politics. Their allied footprint with Iran will be hard to overcome due to Iran’s massive influence in the Arab world.” Sadly, Lebanon has fallen victim to the never-ending Shia versus Sunni proxy war that is responsible for much of the conflict throughout the Middle East. Many Lebanese politicians have become messengers of regional competitors, rarely acting upon what is truly best for the Lebanese people.

The Path Forward

Going forward, Lebanon must prioritize building better institutions and recapitalizing the banking sector. The World Bank has issued a macro-fiscal framework that will get the Lebanese state back on track. It emphasized several important needs:

  • A new debt restructuring program
  • A complete restructuring of the financial sector
  • A new monetary policy framework
  • Phased fiscal adjustment

These are the prerequisites if Lebanon is to ever maintain a legitimate government in the long term. However, to save the Lebanese people from months of dealing with Lebanon’s economic crisis, foreign aid is desperately needed. While the United States did grant “$216 million in combined Department of State and Department of Defense (DoD) military grant assistance,” there is still much more to be done. In the coming months, Lebanon will face dire food, water and medicine shortages. Therefore, it is up to the global community to address Lebanon’s economic crisis and the plight of its people. If not, the country may continue to fall into further disarray.

Conor Green
Photo: Flickr

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