Lebanon's Debt Crisis Has Destroyed the Nation's Economy
On October 17, 2019, civil protest erupted in Lebanon. The reason for the eruption was a proposed tax on the popular WhatsApp app.1 The tax served as only a spark to ignite the uprising. Over the years the economy of Lebanon has been steadily worsening. Of course, the usual suspect is the state, and the preferred method is interventionism.
Although there is no reliable data to track the unemployment rate in Lebanon, at a certain point in 2018 the president himself stated that the unemployment rate was about 46 percent. He attributed this high number to the grave economic situation and to Syrian refugees.2 According to the IMF, the debt-to-GDP ratio is projected to grow to about 185 percent in 2024.3 The official conversion rate of the US dollar to the Lebanese pound is about USD 1 dollar for LBP 1512.5, but in reality as of March the rate at which people are exchanging is USD 1 for LBP 2700.
During the first days of the civil protests, banks shut down and blocked depositors' access to their funds. They then moved to set some severe withdrawal limits on dollar accounts. Some banks have set a limit of USD 600 a month. Although there have been no severe limitations on accounts in Lebanese pounds, as of March 1 I am no longer allowed to spend more than fifteen dollars per month for international transactions using my debit card. Yes, you read that correctly! Fifteen dollars per month. And to top it all, the first sovereign default in Lebanon’s history took place on March 9. Much can be said regarding the current Lebanese economic conditions. But It is self-evident that Lebanon is currently undergoing the worst financial crisis since its independence. Not even during the civil war (1975–90) did people witness such a financial crisis. It could be that during the civil war the state was much more powerless than now and wasn’t able to intervene in the economy as much as it is now.
Between 1993 and 2018, Lebanon’s public debt increased from $4.2 billion to $85 billion4—a debt that has been forced on the Lebanese people, and the burden of which Lebanese citizens have been dealing with for years. To put things into perspective—and this is from the IMF report:
Because of the large public debt, interest payments exceeded 9 percent of GDP. Tax revenues in 2018 were lower than forecast, with all tax revenue categories disappointing in the slow economy except taxes on income and profits.5
Consequences of the State’s Actions
I could go on discussing the awful policies and actions of the Lebanese state. I could give a very accurate description of its anatomy, which is an abomination. But what I would like to shed light on is the forgotten youth of Lebanon. How long is it going to be before the economy recovers? Is it still possible for a young Lebanese to build a better future for himself? Can all the young Lebanese who emigrated ever hope to come back? Existential crises, as bad as they already are for young individuals, have been made worse by the Lebanese government. Future Lebanese generations will inherit a debt that cannot be repaid. The state has robbed us of our prosperity.
Despite everything that has happened, there’s still some hope for the youth of Lebanon. Lebanese have learned a lot from the past few months. It has become self-evident that the government of Lebanon holds too much power and is too centralized. Traditional political parties in charge of the government have had their popularity diminish dramatically. And the best thing is that some Lebanese have been resorting to cryptocurrency as a way to bypass the bank and transfer money. Above all, I truly hope that in the future Lebanese people will aim to reduce the concentration of power that the state holds.
- 1. "Lebanon: WhatsApp tax sparks mass protests," Deutsche Welle, Oct. 10, 2019, https://www.dw.com/en/lebanon-whatsapp-tax-sparks-mass-protests/a-50880357.
- 2. "Lebanon's president says unemployment is at 46 percent. Is it true?," StepFeed, Apr. 4, 2018, https://stepfeed.com/lebanon-s-president-says-unemployment-is-at-46-percent-is-it-true-7375.
- 3. H. Plecher, "Lebanon: National debt in relation to gross domestic product (GDP) from 2014 to 2024," Statista, Nov. 13, 2019, https://www.statista.com/statistics/455257/national-debt-of-lebanon-in-relation-to-gross-domestic-product-gdp/.
- 4. Rouba Chbeir and Marwan Mikhael, "A Historical Analysis of Lebanon’s Public Debt" (Blominvest Bank, 2019), p. 2.
- 5. 2019 ARTICLE IV CONSULTATION—PRESS RELEASE, p. 5