By Dr. Nasser Saidi, Economist and former Minister of Economy and Industry of Lebanon
Since October 2019, Lebanon has been in the throes of a historically unprecedented economic and financial meltdown, simultaneously facing a humanitarian crisis, a debt crisis, a banking crisis, a currency crisis, and a balance of payments crisis. The numbers are staggering. Real GDP has declined for the fourth consecutive year by a cumulative 45% since 2018 making it the second most severe financial crisis in history. The Lira has lost 90% of its value, annual inflation is running at 150% and an 80% de facto haircut has been imposed on deposits.
These multiple crises impose terrible human costs. Unemployment exceeds 45% of the population, with 77% in poverty and 40% in extreme poverty. There are basic commodity shortages and long queues for fuel, bread and medicine. Government-provided electricity is rationed at about three hours per day; the majority of the population relies on expensive private generators. The monthly minimum wage is now the equivalent to $40 (below Bangladesh), a soldier’s salary is $76 while a judge earns $247. People seeking to escape have fuelled an unprecedented wave of emigration of professionals (doctors, consultants, engineers and teachers), other skilled workers and youth. Lebanon’s human capital is leaving. The four main pillars of the economy, trade and tourism, health, education, and banking and finance, are being destroyed.
At present, Lebanon, after a thirteen-month deadlock, has formed a new government under Prime Minister Najib Mikati. The priority today is to restore trust and confidence in government and the banking sector.
But first, why and how did Lebanon descend into economic collapse?Continue reading