Worst case scenario: Warnings of economic chaos in Lebanon

Afif Diab-Beirut

Lebanon is experiencing an unprecedented financial and economic crisis. The popular movement, which has not ceased its demand for 45 days for a national rescue government that works to find quick solutions to the financial and economic crises, is confronted by the ruling political class, as it calls it, which is unable to produce a new government that draws up rapid plans to curb From the deteriorating economic situation.

Big and heavy debt
Lebanon, which is burdened by the high value of public debt, is just around the corner from entering into economic chaos, says financial expert Jassem Ajaka to Al Jazeera Net, the public debt amounted to about $ 86 billion, and is expected to rise by the end of this year to $ 88 billion.

Figures that haunt the Lebanese who took to the streets demanding the development of government plans and legal legislation to limit the aggravation of this indebtedness, which brought the country into a maze, and foreshadowing the worsening of the financial crisis in Lebanon and its negative repercussions on the national economy and social peace, especially as the procedures and measures of the Central Bank and the Association of Banks started The popular movement 45 days ago is actually talking, according to financial experts, about a deep financial crisis in Lebanon.

Economic downturn
According to figures provided by Ajaka according to banking studies, the public debt is divided into internal and external, explaining that the value of external debt is about $ 25 billion of the total public debt.

He pointed out that Lebanon pays $ 6 billion annually to serve the public debt and its capital.He pointed out that the budget deficit in 2018 amounted to $ 6.24 billion, and the expectations for the end of 2019 about $ 4.1 billion.

Ajqa adds that growth in 2018 was 0.2% and in 2019 is expected to grow by 0.5%. “Lebanon is in a downturn,” he says, expressing his fear of what he called economic chaos.

Cash reserves at risk
According to central bank figures, its foreign exchange reserves amounted to $ 38.5 billion last September, but as the country entered a dollar scarcity crisis following Lebanon's credit rating last August, this crisis took on the dimensions of "panic among depositors" - according to Ajaga. - The economic repercussions that have emerged from the scarcity of the dollar, especially in the import operations.

He said that Lebanon imports more than 50% of consumption, pointing out that the trade deficit during the first eight months of this year amounted to about $ 11.4 billion (equivalent to 21% of GDP) and this deficit will negatively affect the foreign exchange reserves of the Central Bank of Lebanon. , As he says.

Foreign currency source
Lebanon relies on foreign exchange earnings for exports, tourism and remittances, while spending on imports and electricity is spent by purchasing fuel for energy production, remittances of workers in the country, and investments and foreign commitments.

Agaka says that Lebanon's imports amounted to $ 11.4 billion in the first eight months of this year.

But things have changed in a snag since last September as banks began to impose restrictions on the delivery of the dollar to importers, which led them to buy it from the black market or banking, which reflected on the rates of import and high prices.

Financial crisis and debt repayment
Despite Lebanon's financial crisis and the scarcity of the dollar, it did not delay in repaying its debts, as it paid several days ago $ 1.5 billion worth of Eurobonds due.

Economist Mohamed Wehbe says the move is "surprising" by the Banque du Liban, which is keen to repay the debt at a time when banks are refraining from paying Lebanese deposits on the pretext of lack of liquidity in dollars.

Next year, three Eurobonds are due on Lebanon, worth $ 1.2 billion in March, 700 million in April and 600 million in June. In order to protect the financial stability of the state.

The Lebanese and their deposits
Lebanese banks have reduced the dollar withdrawals by the depositor to the limits of up to $ 300 a week, and refrain from paying the depositors' money only by bank checks that can only be traded between banks and are not allowed to be transferred abroad.

According to studies by financial experts, 2.5% of depositors own 65% of deposits in Lebanese banks, and this imbalance may exacerbate Lebanon's social crisis.

The worst is coming?
"Lebanon does not have the luxury to waste time to address urgent issues," World Bank Regional Director for Lebanon Saroj Kumar Jah said after a meeting with President Michel Aoun.

He added that the World Bank estimated the poor Lebanese in 2018 by about one-third, compared to 27.4% in 2011-2012.

The World Bank's regional director said the next could be worse if not addressed immediately, and that poverty could rise to 50 percent if the economic situation worsens.

He explained that the unemployment rate, especially among the already high youth, may rise more sharply, hoping the Lebanese authorities to intervene to stop the emerging economic crisis and restore confidence in the economy.