Depending on Lebanon's performance, the World Bank said the country could rank next directly after Chile, which took 16 years to recover from the 1926 collapse, and Spain during the 1930s civil war, which took 26 years, estimating that Lebanon could take 12-19 years. to recover.
The writers Jared Malsin and Nazih Oseiran said - in a report published by the American newspaper "The Wall Street Journal" (wsj) - that relative calm has prevailed in Lebanon during recent decades, but the country is witnessing today a stifling crisis in light of an economic collapse whose repercussions have affected various segments of society due to the ongoing effects. For the explosion of the port of Beirut a year ago.
Power cuts became frequent and people squabbled in supermarkets as shoppers scramble to buy food before it runs out or prices rise due to hyperinflation, which has exceeded 400%.
Robberies are up 62% and murder rates are rising rapidly, according to the report.
A pause for the families of the victims of the Beirut port explosion (communication sites)
Lebanon's worst crisis since independence
In May, the World Bank reported that the economic crisis ranks among the 3 worst crises in the world over the past 150 years.
"At some point, the crisis becomes so bad that the mainstays of recovery fade, and the economy will never return to its previous levels of prosperity," said Mike Azar, a debt finance expert who has advised US government agencies.
Lebanon has suffered for years from poor governance and corruption that caused a financial crisis in 2019, which led to the country defaulting on its bonds for the first time since its independence from the French mandate in 1943. Neither the years-long civil war nor the influx of millions of refugees from neighboring countries Nor the repeated conflicts with Israel, nor the political assassinations in dividing the country in this way.
The World Bank classifies the Lebanon crisis as worse than the Greek crisis in 2008, as well as more severe than the 2001 crisis in Argentina.
Beirut port after the explosion in early August 2020 (Al-Jazeera)
debt burden
As catastrophic as the situation may seem, it is unlikely to cause Lebanon to collapse with a global financial contagion.
The debt burden amounted to 92 billion dollars in 2020, compared to the debts of Greece, which amounted to 417 billion in the same year.
However, the crisis had a ripple effect in the Middle East.
In fact, Yemeni banks have deposited more than $240 million in Lebanon beginning in 2019, and the Kurdistan Regional Government in Iraq has been deprived of its currently stalled oil revenues.
Lebanon's crisis is attributed to its banking system, which slipped into bankruptcy in 2019 when the country's policy of pegging its currency to the US dollar collapsed.
After years of losing sources of dollars that the country used to prop up its currency, and banks closed for two weeks during a wave of protests, the closure backfired, as people ran against banks, causing depositors' accounts to be closed.
The massive explosion precipitated Lebanon's collapse, killing more than 200 people and causing losses of up to $15 billion, according to an estimate by the governor of Beirut.
According to the World Bank, the unemployment rate rose by last December to nearly 40%, while the minimum monthly wage, which was about 450 dollars, became around 35 dollars.
According to the World Food Program, nearly half of the Lebanese population (49%) are concerned about getting enough food.
Since 2019, the value of the lira has fallen on the black market by more than 90% due to its decline from the US dollar (Reuters)
Lebanon's economy today
The authors said that Lebanon's economy today is a far cry from its boom days following the end of the civil war in 1990 when it was bolstered by foreign aid and a cash injection from millions of Lebanese living abroad.
At that time, middle-class Lebanese were getting their salaries pegged to the dollar, buying sports cars and vacationing in Europe, opening luxury car stores and diamond shops in neighborhoods that still bear the bullets of war.
Under the leadership of central bank governor Riad Salameh, the bank has borrowed heavily and put in high returns on dollar deposits to offset the loss of dollars brought in by expatriates and foreign aid over the years, as remittances, tourism and other sources of foreign currency slowed sharply after the turmoil of the 2011 Arab Spring.
In a press conference on the Lebanese crisis in September 2020, French President Emmanuel Macron described the bank system as a "Ponzi scheme", pressing Lebanon's leaders to undertake reforms in order to obtain billions of dollars in international aid.
Since 2019, the value of the lira on the black market has depreciated by more than 90% due to its decline in relation to the US dollar.
As a result, the average citizen's wage has fallen to one tenth of what it was overnight.
repair plan
However, Lebanon had a chance to halt the decline of its economy last year when the government put in place a plan to implement deep economic reforms and cut public spending, including wages, restructuring banks that required a temporary contribution from depositors to help offset system losses estimated at $83 billion.
The International Monetary Fund praised the plan, saying it provided a basis for talks on the financial rescue plan.
The authors pointed out that what fuels the anger against banks is the perception that the Lebanese elite sends its money abroad while the public is prevented from accessing their dollar accounts at home.
Swiss Central Bank data revealed that wealthy Lebanese deposited $2.7 billion in 2020 in Swiss banks alone.
The administration of US President Joe Biden is seeking to double the budget for economic support provided by the US Agency for International Development to Lebanon to reach $112 million in the next fiscal year, according to an official familiar with the budget. Meanwhile, France, Qatar, and the United States provided food and money to prevent the Lebanese army from splitting.