BEIRUT, Lebanon — A devastating explosion on the port of Beirut, the capital of Lebanon, left more than 150 dead and thousands injured. This explosion, which occurred on August 4, 2020, came from a warehouse that held 2,750 metric tons of ammonium nitrate. According to officials, the chemicals were improperly stored in the warehouse for seven years, resulting in the blast. Beirut’s governor Marwan Abboud states in Time Magazine that the explosion, which was felt and heard for more than 100 miles away, shattered the windows of several houses and significant buildings. This left downtown Beirut in a pile of rubble and left more than 200,000 Lebanese homeless. Abboud estimates that the cost to fix these damages is close to $5 billion. Amid Lebanon’s financial crisis, government officials are looking for ways to rebuild their economy and society after the blast.
Lebanon’s Financial Crisis
According to Alphaville Financial Times, Lebanon has a long history of financial imbalance, dating back to the end of the Lebanese civil war in the 1990s. Several factors contribute to this economic instability. The first factor is the large amount of public debt amassed by the Lebanese government. During the post-civil war era, Lebanese officials focused on external and internal borrowing to rebuild their nation. However, high-interest rates led to a national fiscal deficit, in which the government had less income due to excessive spending. This has affected government revenue and GDP over the years. According to a BBC News report, Lebanon is currently the third in the world for being the most indebted country, with interest payments making up a majority of government expenses.
The second factor that contributes to Lebanon’s financial crisis is the devaluation of the lira, which is a direct result of government corruption and debt negligence. According to Business Insider, the currency has lost 80% of its value since 2019. Due to inflation, prices of bread and meat have also risen and power shortages have started to become common. About 45% of the population live below the poverty line and are unable to feed their families. Additionally, approximately 33% of Lebanese are unemployed due to the effects of inflation.
Lastly, Lebanon’s financial crisis is a result of the pressures of Hezbollah, an Islamic-based group that responds to Iran. According to the Foundation for Defense of Democracies, the Hezbollah, which has been deemed a terrorist group by several countries including the United States, controls much of Lebanon’s financial system. Many of the banks in Lebanon are forced to provide financial services to the Hezbollah, who in turn use the services to fund its operations in Iraq. Thus, Lebanon citizens depend on these services and are living in poverty.
The Impact of the Explosion on the Financial Crisis
According to Business Insider, the destruction of the port of Beirut will deepen the financial crisis that Lebanon is facing. Lebanon is an import-dependent country, which means that much of its commodities come from foreign countries and are brought into Lebanon. Some of these commodities include medical supplies and grain. Beirut holds the largest port in the country, with a majority of food being imported through its gates. With Lebanese citizens already struggling to get food, the destruction of this port will only add to the challenges they face. Government officials are discussing the use of Tripoli, Lebanon’s second-largest port, as an alternative to Beirut to import large amounts of supplies. However, there are no final decisions made yet on this matter.
Moreover, according to Reuters, the blast also destroyed Beirut’s grain warehouse, which is the largest grain storage warehouse in all of Lebanon. Grain is a staple food used in Lebanese households for cooking, and with the country having less than a month of grain to depend on, it will increase the number of families unable to feed their families.
Additionally, as poverty rates increase due to food shortages in Lebanon, the thousands of refugees who live in Lebanon will also be affected. According to Syria Direct, about 55% of the 1.5 million Syrian refugees residing in Lebanon in 2019 lived on less than $2.9 per day. With the impact of COVID-19 as well as the destruction of the blast, the amount of income these refugees make will significantly decrease.
Efforts Taken by Organizations
According to the New York Times, several organizations are providing immediate aid to Lebanese citizens affected by the explosion. The United Nations’ World Food Program is also providing food to those who rendered homeless after the blast and to families living in extreme hunger due to the high prices of food. Islamic Relief is supplying chains of food and emergency aid packages to Lebanon. Also, Baytna Baytak, a charity specializing in providing free housing to healthcare workers, is working with Impact Lebanon to raise funds for those displaced after the explosion. Save the Children has set up a Lebanon Children’s Relief Fund to raise money for families who do not have enough funding for food. UNICEF is also working to provide vaccines, medical equipment and food packages to Lebanon. With support from these organizations, Lebanese government officials are hoping to fix the destruction of the blast and restore their economy.