The economic collapse in Lebanon is now four years old. But salvation is not yet visible on the horizon. In what was once called the “Switzerland of the Middle East”, three-quarters of its 5.5 million inhabitants are mired in poverty. The Lebanese pound – for years pegged to the dollar – has become a “rag paper”, losing 98% of its value since 2019. Inflation has jumped to 250%. GDP has shrunk by 40%.
Amid informal capital controls and desperation, more and more depositors are resorting to heists to access their life savings. Food insecurity has hit “red”.
In the absence of financial liquidity, power plants often turn off the switch, with generators the only alternative – even for hospitals – while fuel prices have also caught fire. As for the rest, the country is sliding into the “abyss” in… “automatic”.
For months, Lebanon has been without an elected president, with a caretaker government, a deeply divided parliament and the 30-year-old and former governor of the Central Bank under investigation, wanted by Interpol.
The so-called “rescue package” from the IMF, amounting to 3 billion dollars, “stumbles” in the absence of political will for tough economic reforms.
Immersed in corruption for decades, the domestic elite – political and economic, closely intertwined – is now trying to avoid them, promising recovery… by trickery. They do not want to shoulder the burden of the costs of the financial collapse and banking restructuring.
Not even to dissolve the network, which until today allowed them to “milk” the people and the system through what the World Bank has compared to a “Ponzi Scheme”.
Therefore, the Lebanese elite are now betting their “change” on bank transfers from the diaspora – which now make up almost 40% of the economy – on the burgeoning tourism industry and the exploitation of natural gas fields.
“Welcome the dollar”
For this summer season, Lebanon’s Ministry of Tourism is predicting a record number of tourists.
Many are members of the Lebanese diaspora, who spend lavishly during the day at the beach resorts along the Mediterranean coast and at night in the nightclubs. But even for them, accuracy seems unbearable.
Three years after the deadly explosion in the port of Beirut – which left 218 dead, more than 7,000 injured and almost half the city in ruins – the cost of living in the Lebanese capital has become “saltier” than even Madrid or Lisbon .
For example, a simple natural juice can cost up to 12 dollars.
With this and that, the government estimates 9 billion dollars in revenue from summer tourism. However, not everyone will taste their “sweetness”.
Large and secondarily medium-sized businesses in the tourism sector will benefit primarily, where workers’ wages remain stuck at starvation levels, with grueling hours. In any case, tourism revenue is seen in itself as a “band-aid” to the fading economic “wound”.
For its “blood supply”, the Lebanese authorities count more on the exploitation of the energy resources in the depths of the Mediterranean.
The road was opened after the recent historic agreement with Israel – after years of US mediation – that ended the long-running maritime border dispute and marked the start of Beirut’s efforts to exploit gas and oil fields in the EEZ.
Lebanon’s first exploratory drilling has just begun in the offshore “plot” 9, by the consortium where the French company TotalEnergies has the “upper hand” and which includes Italy’s ENI and Qatar’s state-owned QatarEnergy.
The results of the specific investigation are expected within the coming November, while the consortium had expressed interest in other “plots” around block 9.
Pious desires
However, the establishment of a state investment fund for the collection of revenues, which was proposed at the end of last month by the parliamentary Finance and Budget Committee, is progressing despite obstacles. Of course, it is not the only bill that has “stuck”.
If the parliament does not proceed with their approval, there will be no economic stability in the country.
Lebanon’s economy is cash-based, exposing Lebanon to multiple risks. If they fail to find a solution, the current situation will become even more difficult.
However, many legislators express reservations about the State Wealth Fund, citing “loopholes” in the relevant bill and favoritism. Apparently, a new dispute is arising over the division of this “economic pie” as well.
Otherwise, in the newly approved budget the deficit has shot up to around 24%. Most businesses now require payment in dollars: from grocery stores to pharmacies.
Officials are pleading for humanitarian aid similar to that of a nation at war.
Also caught in the spiral of inflation, the Lebanese diaspora has begun to tighten its grip on remittances. Desperate Lebanese day laborers are trying in every way to take advantage of the summer season and the tourists to increase their income now that it is “turning”.
But as autumn approaches menacingly and government promises do not fill their empty stomachs, they seem to be running out – along with hope – and the last nuggets of their patience.
