Lebanon Faces Economic Collapse As Financial Crisis Worsens

Lebanon’s financial crisis might be one of the world’s worst economic crises in 150 years, according to a recent report by the World Bank. The crisis, which began in 2019, was exacerbated by the pandemic and last summer’s Port of Beirut explosion. Ongoing economic woes are accompanied by social instability as national fragmentation continues to plague the country.

Lebanon’s economic emergency is accompanied by a government power struggle between the president and prime minister. This conflict has prevented the government from enacting policy in response to the declining economic conditions. In the wake of the Beirut explosion, Lebanon’s entire cabinet resigned. In the ten months since that dramatic event, newly appointed Prime Minister Saad Hariri and President Michele Aoun have been unable to work together and appoint new cabinet members. At a time when Lebanon needs a strong, unified government to help usher in an age of recovery, it has the opposite.

Lebanon is governed under a power-sharing sectarian system. Through this system, the president must be a Maronite Christian and the prime minister must be a Sunni Muslim. Lebanon’s current President, Michel Aoun, is a close ally of Hezbollah, a militant group and American-listed terrorist group. Due to Hezbollah’s increasing influence in Lebanon, the country’s neighbors have been hesitant to offer Lebanon aid. 

As the crisis continues to worsen and government intervention seems unlikely, conditions in Lebanon are growing poorer on many fronts. Lebanon defaulted on debt repayments which caused huge shortages of basic needs. Right now, there are food, medicine, and fuel shortages. Currently, Lebanon experiences electricity brownouts that average 12 hours a day; however, concerns are growing that a total blackout is near. 

The World Bank explained in a June 1 press release that “the dire socio-economic conditions risk systemic national failings with regional and potentially global consequences.”

Lebanon’s GDP has plummeted, falling from $55 billion in 2018 to $33 billion in 2020. With the country’s unemployment rising to 40% by the end of 2020 and the Lebanese Pound losing 85% of its value, half of the population has fallen into poverty. This has caused many of Lebanon’s skilled workers to flee the country in pursuit of better opportunities abroad for a stable life. 

Regarding the situation, World Bank Regional Director Saroj Kumar Jha said, “Lebanon faces a dangerous depletion of resources, including human capital, and high skilled labor is increasingly likely to take up potential opportunities abroad, constituting a permanent social and economic loss for the country.”

While outside forces like France and the head of the Maronite Church have tried to intervene and mediate for Lebanon’s government, the Associated Press noted that these efforts have “faded without a breakthrough in the face of intransigence from the rival parties in Lebanon.”

Lebanon’s current crisis is posing a serious threat to the country’s stability, the biggest threat since the 1975-1990 Civil War. Experts have emphasized that to reverse Lebanon’s deteriorating situation, the government needs to act consistently and honestly while making reforms for economic recovery, and that requires the active leadership that is missing today.

“The collapse, if it happens, God forbid, will have very grave consequences not only for the Lebanese or those living here but also on friendly countries from the land and sea,” former Prime Minister Hassan Diab said. “No one will be able to control what waves the sea bring.”