Little to no electricity, fuel, and medical supplies. That is the reality for many people living in what was once called the Paris of the Middle East.
According to the World Bank, the economic situation in Lebanon is one of the sharpest depressions of all times. Since 2019, nearly 90% of the Lebanese currency has been devalued, with people having little to no access to their own money in bank accounts.
According to Bloomberg, Lebanon’s inflation rate has risen to the highest in the world. For example, from August to September 2021, consumer prices rose 10.25%, and food prices rose 20.82%.
Because of the depletion of foreign currency, many basic needs such as medication, food, water, and mazout – a resource needed for electrical generators – have been either unavailable or extremely expensive.
The combination of the currency collapse, limited purchasing power and poor financial and governmental infrastructure, has made for heavy shortages of vital products.
The most recent crisis in Lebanon has been one of fuel. Back in August 2021, the Lebanese central bank decided to stop subsidising fuel. This led to a sharp increase of about 80% to the original subsidised price of fuel, a price that most Lebanese simply cannot afford.
Considering the fact that about three quarters of the Lebanese population are living below the poverty line, and that, except for cars, buses or taxis, there are few other transport methods available in the country, this fuel crisis has made commuting in Lebanon practically impossible.
Light at the end of the tunnel?
In recent news, according to Lebanon’s finance ministry, the new Lebanese government would resume talks with the IMF, which has offered $1.135bn in its reserve currency, through Special Drawing Rights, to the Lebanese central bank.
But, these funds are not free. Indeed, the Lebanese government will have to make reforms to its administration, and the ways it runs the country.
Demands from the IMF and other international donors include, but are not limited to a relaunch of the transport sector, restoring governmental transparency, strengthening an anti-corruption framework, implementing a criminal audit, and designing a complete restructuring of Lebanese debt and financial sector.
Moreover, many other international actors have offered economic and technical support to Lebanon. For example, according to the United States Agency for International Development’s official report, the USA will offer $100m of aid to mitigate food shortages, healthcare, as well water and sanitation support.
Is this crisis specific to Lebanon only?
As Lebanon’s GDP has shrunk by 40% between 2018 and 2020, other countries in the MENA region have been faring well. The Gulf Cooperation Council, specifically, is one of the strongest economic unions of states in the world.
Although GCC economies are renowned for their natural resources, its six members have been diversifying their strengths to include tourism, banking and real estate. In 2020, the UAE’s GDP for example, was of $354.28bn with a GDP per capita of $43.1k, whereas Lebanon’s was of $19.13bn, with a GDP per capita of $4.9k.
Lebanon’s main economic strengths, on the other hand, do not rely on natural resources like GCC countries, but are rather based on its service sectors, such as banking and tourism.
However, since 2019, banking services in Lebanon have completely collapsed, and since the 2020 August 4th explosion, tourism has severely plummeted, with only a rare few tourists and expats returning to Lebanon to visit the country, friends or family.
This year, in light of the COVID-19 pandemic, the August 4th explosion, and the deep economic and financial crisis, many Lebanese services, companies, and industries have not survived, whilst some are barely hanging on.
The restaurant and food industry specifically has seen major changes. Lebanon has always been known for its colourful and flavourful cuisine. However, many Lebanese restaurants and food services have now either declared bankruptcy, or have closed due to the lack of demand.
Even international food, clothing and beverage companies have decided to shut down their operations in Lebanon.
For example, Coca Cola, Victoria’s Secret, American Eagle Outfitters, Adidas and Marks and Spencer are few of many brands to have closed down their stores in the Middle Eastern country. Its tourism sector has also been greatly affected, as many countries have issued travel warnings for Lebanon, and huge local hotels such as Le Bristol have closed down in the past year.
What now for the Lebanese dream?
Perhaps financial aid from the IMF and other international donors will help improve the socio-economic situation in Lebanon, and restructure the country’s financial institutions in such a way that households will be able to survive and make a proper living. It is difficult to see how the people of Lebanon can continue living in such conditions.
One can only hope for a Lebanese economic revival that be sustained with a stable growth, by a stable, elected and trusted government, where employment, access to food, healthcare, education, and financial security are protected human rights.
