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Compounding problems, an explosion on Aug. 4 at Beirut port killed about 190 people and caused billions of dollars of damage. Lebanese views: Poll reaction. Lawmakers also get seats in the parliament based on sectarian quota. Anyone worried about Hezbollah’s powerful arsenal should be even more scared by the deep economic crisis that could very well strengthen the movement's ability to rule Lebanon. On the black market, the exchange rate is around 4,000 pounds to the dollar as business people, including importers are chasing the greenback. Records from the Ministry of Labor indicate that new migrant worker arrivals dropped by 75 percent from 2019 to 2020. 29 Apr 2020 The policy of relying too much on debt to fund the budget has created problems for the young government of Prime Minister Hassan Diab. Subscribe to our Youtube channel for all latest in-depth, on the ground reporting from around the world. Around 50 percent of the state revenue goes to paying off the debt. But the country’s economic crisis has farmers reconsidering the crop. The weeks-long curfew to stem the spread of the novel coronavirus, eased just recently, has exacerbated the already worsening economic outlook. Our Standards: The Thomson Reuters Trust Principles. Under Lebanon’s governing system, the president has to be a Manorite Christian, the prime minister a Sunni Muslim and the speaker of parliament a Shia Muslim. Lebanon has been in economic and financial crisis since last year. Poverty is rising sharply. A picture is worth a thousand words. What was less obvious - and is now a point of contention - was a rise in liabilities. Meanwhile, the cost of servicing Lebanon’s debt surged to about a third or more of budget spending. After the civil war, Lebanon balanced its books with tourism receipts, foreign aid, earnings from its financial industry and the largesse of Gulf Arab states, which bankrolled the state by bolstering central bank reserves. As Washington-based Lebanese American commentator Hussain Abdul-Hussain explained it to me, Lebanon’s big economic play after its 15-year civil war ended in … Lebanese people, frustrated over rising prices, falling income and an erosion of their savings with its pound currency losing value, poured out on the streets in thousands. A confluence of government malpractice, economic instability and external interference has driven Lebanon's devastating crisis. Salame has been the head of Banque du Liban since 1993. The impact of the coronavirus pandemic on remittances, the money expats send home to families in Lebanon, can add to the economic woes. For hundreds of thousands of Muslim households in Lebanon, the country's financial crisis means the Ramadan Iftar is a stripped down affair, with families who have come together to … First, public sector debt had reached such elevated levels that a default had become a question of when, not if. With the pound fixed at such a high artificial level when there’s a shortage of dollars in the market, banks have faced a barrage of withdrawals from depositors. 6 min read Ratnadityasinh Chavda Lebanon is a symbol of peace and stability, probably one of the only states in the Middle East whose image has not been tarnished and mired by a string of conspiracies, or a state that has not let political upheaval and civil violence get in the way of its development dream. This has spawned a culture of political appeasement as evident from the high number of government jobs that politicians hand out to their supporters. Over the years, successive governments have borrowed heavily from domestic and foreign lenders. Lebanon’s economy has been troubled for years, but problems have multiplied since September into a full-blown fiscal crisis that has been one of the factors spurring popular anger, as hundreds of thousands have taken to the streets. That was until 2016, when banks began offering remarkable interest rates for new deposits of dollars - an officially accepted currency in the dollarised economy - and even more extraordinary rates for Lebanese pound deposits. BEIRUT (Reuters) - Lebanon is grappling with a deep economic crisis after successive governments piled up debt following the 1975-1990 civil war … A drop in remittances from Lebanese abroad and the general economic malaise has led to a shortage of US dollars. With a big diaspora and Lebanon’s low tax regime skewed in favour of the rich, slapping a fee on the way many Lebanese kept in touch with relatives was disastrous. The central bank has also kept the Lebanese pound rigidly pegged at 1,507 pounds to a US dollar. Prices of basic necessities, have risen dramatically since October 2019, while … Remittances make up about 12.7 percent of GDP, making Lebanon the second most remittance-dependent Middle Eastern country - only behind Palestine. But the central bank, Banque du Liban, led by former Merrill Lynch banker Riad Salameh since 1993, introduced “financial engineering”, a range of mechanisms that amounted to offering banks lavish returns for new dollars. Lebanon is enduring a severe, prolonged economic depression: real GDP growth contracted by 20.3% in 2020 and inflation reached triple digits, while the exchange rate keeps losing value. And the government’s failure to deliver reforms meant foreign donors held back billions of dollars in aid they had pledged. These ad-hoc and illegal measures by the banking sector have become one of the most salient markers of Lebanon’s economic crisis. Lebanon is one of the world's most indebted countries, with public debt at $85 billion means a 153% debt to GDP, 3rd largest after Japan and Greece. Banks, central to the service-oriented economy, are paralysed. But Lebanon had little else to show for a debt mountain equivalent to 150% of national output, one of the world’s highest burdens. This turned out to be a bounty for commercial banks, which lent to the government at a high rate and booked profits. Even before the lockdown, the World Bank had raised the fear that half the population could face poverty due to the deteriorating economic situation. Demonstrations have convulsed Beirut and other cities across Lebanon since mid-October, forcing the prime minister to resign and shaking confidence in an economy that was already in crisis. The budget deficit rocketed and the balance of payments sank deeper into the red, as transfers failed to match imports of everything from staple foods to flashy cars. Some economists have described Lebanon’s financial system as a nationally regulated Ponzi scheme, where new money is borrowed to pay existing creditors. What’s behind Lebanon's economic crisis? The currency has crashed, driving a swathe of the population into poverty. Now the Social Affair Minister Ramzi Musharrafieh told CNN that up to 75 percent of the people require aid. At least a dozen branches of different banks have been firebombed since protests broke out this week. Later that month, Prime Minister Saad Hariri had to step down. In the ongoing protests in Lebanon, people have focused their anger on one particular target: banks. Without a doubt, Lebanon’s economic crisis has shaken the kafala system. Lebanon was still politically dysfunctional. Lebanon, the tiny nation of five million, which borders a hostile Israel, is the world’s third most indebted country. The economic crisis has become more acute during the coronavirus pandemic. The banking sector, which informally adopted strict capital controls, has ceased lending and does not attract deposits. Nearly 1.5 million Syrians have taken refuge in Lebanon as a result of the nation’s own civil war. According to my research on the current economic crisis, Lebanon’s unproductive rentier economy revolves around banking and real estate, which creates, as a result, great income inequality. Foreign exchange inflows dried up and dollars exited Lebanon. Improved dollar flows showed up in climbing foreign reserves. Middle East Lebanon faces its worst crisis since the civil war. Palestinian journalist speaks out on Israeli aggression as bombs drop, Show people, places and other topics in this story. For three months now, people in Lebanon have been demanding change. BEIRUT (Reuters) - Lebanon is grappling with a deep economic crisis after successive governments piled up debt following the 1975-1990 civil war with little to show for their spending binge. The country pays a yearly servicing debt fee around $6bn, or a third of the state budget estimated at $19 billion in 2018. Writing by Edmund Blair, Editing by Timothy Heritage. A cataclysmic blast in Beirut, Lebanon's capital, is poised to send an economy already deep in crisis hurtling toward a dangerous unknown. Dollars flowed again and banks could keep funding the spending binge. In some of these banks, politicians hold shares, something that has added to the anger on the streets of Lebanon and Tripoli. In the ongoing protests in Lebanon, people have focused their anger on one particular target: banks. a governance crisis emanating from a dysfunctional sectarian system that hindered rational policymaking and permitted a culture of corruption and waste. Both Lebanon and Syria have endured hardships of civil war and faced a surge in refugee intake. Anger has centred on political corruption and a system that rewards sectarian loyalty instead of competence during elections and government’s failure in providing essential services such as electricity. The final spark for unrest came in October 2019 with a plan to tax WhatsApp calls. Lebanese protesters back in streets following brief lull, Lebanon faces economic 'catastrophe' – new PM, Lebanese protesters unbowed as army vows to open roads, Exclusive: Mogherini under fire over stink in Lebanon from EU cash, Biden can’t promote human rights globally while Gaza still bleeds, Biden’s support for Israeli aggression causes rift in the Democratic Party, Rising hate crimes and discrimination is making Germany unlivable, Bodies floating in a holy river describes India's grim Covid-19 reality. Downtown Beirut, levelled in the civil war, rose up with skyscrapers built by international architects and swanky shopping malls filled with designer boutiques that took payment in dollars. The country’s currency has lost almost 80% of … Doctors have staged sit-ins at hospitals to warn of … Bitcoin is a distributed, worldwide, decentralized digital money. Mass protests, driven by a disenchanted youth demanding wholesale change, erupted against a political elite, many of them aging warlords who thrived while others struggled. The Lebanese crisis explained ... Lebanon is the most politically complex and religiously divided country in the Middle East, which is what makes it such a potentially explosive factor in an unstable region. Even before the pandemic hit, the World Bank said Lebanon's economy had contracted last year. Also Read U.S. calls on Lebanon to 'urgently' form new government “Lebanon’s economic crisis is fast slipping out of control, driven by a currency collapse that’s decimating businesses and plunging families into destitution. lebanon economic crisis – explained! The economic crisis in Lebanon eerily compares to the current Syrian crisis. The currency collapsed, sliding from 1,500 to the dollar to a street rate of as much as 8,000. […] The country’s pound has lost nearly 60 percent of its value on the black market in the past month, threatening to suck the economy into a hyper-inflation spiral. As such, the period following the financial crisis saw Lebanon being one of the very few countries to offer investors highly attractive rates of return, while much of the rest of the world slashed rates to stimulate economic recovery. Lebanon’s economic crisis threatens to destroy its middle class. Yet one of its most reliable sources of dollars was remittances from the millions of Lebanese who went abroad to find work. But how did the nation of about 6 million people get there? The worst economic crisis in decades has seen Lebanon’s economy implode, with more and more people being drawn into poverty. But the deposits, including those from the foreign investors, attracted on the back of high interest rates instead of good economic performance, were a bad idea as once this money leaves, it leaves in droves. Sunni Muslim Gulf states turned away with the rising influence in Lebanon of Iran, via Hezbollah, a heavily armed Lebanese Shi’ite group whose political power has grown. But remittances started slowing from 2011 as Lebanon’s sectarian squabbling led to more political sclerosis and much of the Middle East, including neighbouring Syria, descended into chaos. Savers have been locked out of dollar accounts or told funds they can access are worth less. All quotes delayed a minimum of 15 minutes. The Root Cause. Even in the 2008 global financial crash, they sent cash home. Lebanon's economic crisis, coupled with the impact of the coronavirus pandemic that shut the country down, could lead to a famine. By the time the crisis erupted in October 2019, the economy was facing four extraordinary challenges. Is there a greater resistance building within Israel? Elsewhere in the world savers earned tiny returns. When the state needed to rein in spending, politicians splurged on a public sector pay rise before the 2018 election. This made the small Middle Eastern nation a magnet for wealthy investors from around the world. That tax was a desperate attempt by the government to raise money to pay off its burgeoning expenses. With hindsight, Lebanon’s economic crisis was predictable. Lebanon’s current economic unrest can amount to many reasons, one of its main being the undeniable fact that Lebanon does not have the foundation nor independence that allows for a real economy. Explained: Lebanon’s Economic Crisis Skip to entry content. More than $5.7 billion have been withdrawn from the financial system in the first two months of this year. Lebanon’s ability to handle a civil revolt over poor economic conditions that could then be exploited for political and military purposes are under question. Prime Minister Hassan Diab, who took office in January, has blamed Riad Salame, the central governor, for much of the present trouble. The blast came at a difficult time for Lebanon, which is not only trying to curb the spread of the coronavirus but is also mired in an unprecedented economic crisis. A village in Lebanon, where cannabis grows everywhere, has long counted on hashish for income. Crowds turn out for vote. Rivalries left it without a president for most of 2016. What’s happening now is the continuation of a spontaneous protest drive which started on October 17 when a few people converged at Beirut’s Riad al Solh Square to record protest against a proposed tax on WhatsApp, the popular messaging service. 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