Lebanon: Worst Crisis Since The 1800s, World Bank Warns

Beirut was once the Paris of the Middle East, but not anymore. The civil war of 1975-1990 brought Lebanon to its knees, and the country never recovered its wealth and splendor. Since 2019, a devastating economic crisis has been affecting the country and impacting every aspect of its citizens’ lives. The World Bank has ranked the current Lebanese crisis amongst the worst since the 1800s in terms of effects on living standards. 

Lebanon’s economy started deteriorating when it became clear that the government had no capacity to finance its debts, and the national currency quickly lost its value. Lebanon’s GDP declined by 21.4% in 2020, by 10.5% in 2021 and is projected to fall another 6.5% in 2022, according to the World Bank. The Lebanese pound lost 90% of its value. This year, the war in Ukraine has worsened the situation, as most of Lebanon’s imports of wheat and oil come exclusively from Russia and Ukraine. 

A recent crime spree in the country is the mere subproduct of the frustration and desperation of Lebanese people. The NY Times reported that last Friday at least five banks were assaulted by customers, armed with real or toy weapons and demanding access to their own savings. People are forced to resort to such extreme measures to face expensive medical treatment or other emergency payments: in the last three years, banks have only allowed customers to withdraw a small amount of money, not enough to cover all expenses. These bank hold ups have therefore become increasingly frequent, and the Interior Minister Bassam al-Mawlawi has warned that they are “destroying orders”. Lebanese citizens, however, do not seem to share that view, as crowds gather outside the banks in support for the bandits. The Association of Lebanese Bank, following recent news, has announced a three-day closure of all branches both over security concerns and as a sign of protest. Until an economic recovery plan is agreed on, however, the situation will not improve, and liquidity problems will remain. 

One of the subsets of the broader economic crisis is the electricity crisis, which has a direct impact on people’s lives – especially for those belonging to the middle or lower class. Lebanon has been experiencing extensive power cuts since the breakout of the crisis, but the situation has worsened over the last year: the state supplies power for only one or two hours a day, without any fixed schedule, leaving people in a continuous wait for the light to turn on. Those who can afford it (not many) own private diesel-powered backup generators, which are still often inadequate to supply power to an entire household.  

The telecommunication sector, which used to be major source of revenue for Lebanon, was also severely impacted by the crisis. In July, as a result of the rising costs of operations, the Ministry of Telecommunications raised all prices for mobile phone services. While internet service is described by the UN as a human right, poor Lebanese people have been forced to simply give up the use of their mobile devices – with a devastating effect both on their personal lives and living conditions. The lack of phone and internet services has, in fact, made people unable to access humanitarian aid, as shown by the decrease in the number of calls registered by NGOs and aid agencies. Communication isn’t easy even for those who own a phone: in September, several strikes by the employees of the national phone companies Touch and Alfa resulted in disruptions in internet and cellular data communications, leaving some areas completely isolated.  

Moreover, the Norwegian Refugee Council recently conducted research on Lebanon’s housing crisis, and the results are appalling. Families are risking evictions for not being able to pay rent at the end of the month – something which is not surprising, considering that the average rent went up 100% in some areas, while salaries remained the same.  

According to the UN, 82% of the population lives in poverty, and of the hundreds of thousands of Palestinian and Syrian refugees hosted in Lebanon, 88% live under minimum survival conditions. It is therefore not surprising that so many are trying to flee the country. In fact, according to Information International, a Lebanese research and consulting firm, 79,000 Lebanese moved abroad in 2021, and figures are expected to increase. The latest report from the Mercy Corps has highlighted how many residents and citizens choose to emigrate via boat, with high security and safety risks and no guarantee of a better future.

At the heart of the Lebanese crisis was – and still is – a political system of impunity, corruption and structural inequality. Investigations have shown that political connections with the banking system are pervasive and that the political establishment, aware of the upcoming catastrophe, only protected its own interests. Modern Lebanese politics functions with a corrupt patronage-based political system centered on sectarianism. The highest leadership positions are divided among the major religious sects, with the speaker of the parliament being Shia, the premiership Sunni and the presidency Christian. In the last elections, held on May 15, Hezbollah and its allies lost their parliamentary majority, giving a glimmer of hope for change. A new government has however still not been formed, as President Michel Aoun and PM Najib Mikati are unable to reach a compromise on the cabinet makeup.  

The only way out of the economic crisis is with the help of the International Monetary Fund (IMF) and the international community, but an agreement can only be found if Beirut makes progress on the reforms required to meet the IMF benchmarks. A new functioning government is therefore absolutely essential right now, or else Lebanon will remain the “failing State” that UN expert Oliver De Schutter described it to be. 

Camilla Giussani


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