Lebanon’s long road to recovery amid financial implosion

Lebanon is facing one of the world’s worst economic and financial crises in the past 150 years, according to the World Bank.
The Bank called Lebanon’s economic collapse a “deliberate depression”, due to “continued political inaction” and “persistent and debilitating internal political discord”.
Lebanon’s three-year financial crisis has now plunged about three quarters of the population into poverty and food prices have increased more than 11 times.
Gross domestic product plunged to about $20.5 billion in 2021 from about $55 billion in 2018, the kind of contraction typically associated with wars, according to the World Bank.
The Lebanese pound has lost more than 90% of its value, driving up the cost of almost everything in a country dependent on imports and demolishing purchasing power.
Poverty rates are soaring in the population of around 6.5 million, with around 80% of people classified as poor, according to the UN agency ESCWA.
Last September, more than half of families had at least one child who skipped a meal, Unicef ​​said, compared to just over a third in April 2021.
The Lebanese financial system suffered massive losses. The government estimates overall losses at around $70 billion.
Banks are also paralyzed.
Savers were frozen from US dollar accounts. Local currency withdrawals apply exchange rates that erase up to 80% of the value.
Dependent on imported fuel, Lebanon faces an acute energy crisis. Even before the crisis, electricity was lacking, including in the capital.
Lebanese have emigrated in the largest exodus since the civil war. Believing that their savings are lost, many have no intention of returning.
A 2021 Gallup poll found a record 63% of those polled wanting to leave permanently, up from 26% before the crisis.
The World Health Organization has said most hospitals are operating at 50% capacity. About 40% of doctors, mostly specialists, and 30% of nurses have emigrated permanently or work part-time abroad.
In a broader sense, the growing debt accumulated over decades by successive governments is at the root of Lebanon’s economic collapse.
But the current crisis began in late 2019, after the government announced proposed new taxes, including a $6 monthly fee for using WhatsApp voice calls.
The measures sparked a long, simmering anger against the ruling class and months of mass protests.
In March 2020, Lebanon failed to repay its huge debt, worth at the time around $90 billion or 170% of GDP – one of the highest in the world.
Officials and the media speak of Lebanon becoming a “failed state”. President Michel Aoun warned last December that the state was “collapsed”.
Certainly, major challenges await Lebanon in forming a new government amid the country’s devastating financial crisis.
An agreement with the International Monetary Fund is widely seen as the only way for Lebanon to begin to rebuild the economy and strengthen governance and transparency, and to find a way out of the financial and economic collapse, its most serious crisis. destabilizing since its civil war of 1975-90. .
The government reached a staff-level agreement with the IMF in April that pledges $3 billion in financing over four years to help the country recover from the collapse.
A full deal is conditional on Lebanon implementing a series of measures, including starting to restructure its banks which have blocked the majority of depositors from their hard currency savings since the 2019 financial implosion.

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