(MENAFN- Gulf Times)
Lebanon is facing one of the world's worst economic and financial crises in the last 150 years, according to the World Bank.
The Bank has deemed Lebanon's economic collapse a“deliberate depression,” because of“continuous policy inaction” and“persistent and debilitating internal political discord.”
Lebanon's three-year financial crisis has now pushed an estimated three-quarters of the population into poverty and food prices have gone up more than 11-fold.
Gross domestic product plunged to an estimated $20.5bn in 2021 from about $55bn in 2018, the kind of contraction usually 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 reliant on imports, and demolishing purchasing power.
Poverty rates are sky-rocketing in the population of about 6.5mn, with around 80% of people classed as poor, says the UN agency ESCWA.
Last September, more than half of families had at least one child who skipped a meal, Unicef has said, compared with just over a third in April 2021.
Lebanon's financial system has suffered massive losses. The government estimates the overall losses at around $70bn.
Banks are paralysed, too.
Savers have been frozen out of US dollar accounts. Withdrawals in local currency apply exchange rates that erase up to 80% of the value.
Reliant on imported fuel, Lebanon is facing acute energy crunch. Even before the crisis, power was in short supply, including in the capital.
Lebanese have emigrated in the most significant exodus since the civil war. Believing their savings are lost, many have no plans to return.
A 2021 Gallup poll found a record 63% of people surveyed wanted to leave permanently, up from 26% before the crisis.
The World Health Organisation has said most hospitals are operating at 50% capacity. Around 40% of doctors, mostly specialists, and 30% of nurses have permanently emigrated or are working part-time abroad.
In a wider sense, mounting debt accrued over the decades by successive governments is the root cause of Lebanon's economic collapse.
But the current crisis began in late 2019, after the government announced new proposed taxes, including a $6 monthly fee for using WhatsApp voice calls.
The measures set a spark to long smouldering anger against the ruling class and months of mass protests.
In March 2020, Lebanon defaulted on paying back its massive debt, worth at the time about $90bn or 170% of GDP — one of the highest in the world.
Officials and the media talk of Lebanon becoming a“failed state”. President Michel Aoun warned last December that the state was“falling apart”.
To be sure, major challenges lie ahead for Lebanon to form 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 start rebuilding the economy and strengthen governance and transparency, and to find a way out of financial and economic meltdown, its most destabilising crisis since its 1975-90 civil war.
The government clinched a Staff-Level Agreement with the IMF in April that pledges $3bn in financing over four years to help the country recover from the meltdown.
A full agreement is conditional on Lebanon implementing a series of measures, including starting to restructure its banks which have locked the majority of depositors out of their hard-currency savings since the 2019 financial implosion.
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