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. Late last month, the country’s capital experienced a massive explosion, comparable to the ones caused by the United States bombing on Hiroshima and Nagasaki. Since then, the country has been on the front page of every newspaper and a topic of discussion in every household. However, Lebanon’s problems did not unravel with the explosion, instead, the government has been recording a major economic downturn along with extensive failures in domestic policies for quite some time now. Lebanon, a nation of 5.4 million, with a large group of Syrian and Palestinian refugees has been thrust into one of the worst economic crises, one that has led to a massive collapse of the currency, businesses shutting, and a record-breaking rise in prices. As evidenced by a review of the country’s policies, it is abundantly clear that this has been a result of the government’s decision to rely on increasing debt to pay the bills and at the same time failing to introduce reforms that would bolster the economy.

Background of the Problem

The first warning signs of trouble were visible on the horizon when the banks decided to reduce the amount permitted per withdrawal, and the country experienced anti-government protests. Delving slightly deeper into the root cause of the trouble and studying the previous economic trends, we can trace back the problem to the government’s decision to make up for Lebanon’s lack of dollars due to the complete absence of export production, by accepting investments and deposits from wealthy investors. To attract greater investments, the government offered higher rates, whose yields could only be met with newer deposits. The following policy was dubbed as a  ‘State-Sponsored Ponzi- Scheme’. Seeing the unsustainable nature of the same, many investors started pulling out. This essentially plunged the nation into not only a severe shortage of dollars but also severely affected millions of citizens. The World Bank predicted the poverty increase from 30% to 50%, and at the same time, the Human Rights Watch advised the government to act swiftly, or else millions of Lebanese and the excess of one million Syrian and Palestinian refugees would face severe hunger at the time of the lockdown initiated to avoid the spread of the deadly virus.

How has the Economy Survived for so long?

While analyzing the reason for Lebanon’s economy surviving for so long, one happens to notice an economic tendency of depending mainly on foreign remittances. Lebanon’s economic policy can be seen as an amalgamation of migration and geopolitics. These sums of remittances coming into the country from Lebanon’s large immigrant population, provided the backbone for the country’s banks to lend to the government. As mentioned earlier, due to the unsustainable nature of these policies and an array of other reasons, the current inflows of funds have dried up drastically. These reductions have mainly been due to the declining oil prices and the Syrian War that has made Lebanon less attractive for investment purposes.

Internal Factors

We cannot turn Nelson’s eye towards internal factors when it comes to analyzing the current economic crisis. The country has some of the worst economic fundamentals in place. It is one of the most indebted nations, so much so that the total debt amounts to 155% of the Gross Domestic Product. Since the country lacks a strong export sector, it invariably imports more goods and services, as a result of which the budget deficit is set to reach 10% of the Gross Domestic Product. The banks rely on wealthy Lebanese to deposit their money in Beirut. However, the enormous interest rates earned by these depositors flow into very few pockets. It is estimated that around 1% of all accounts are said to hold roughly half of the total deposits. At the center of Lebanon’s unproductive economy are the banking and real estate sectors, which have led to a great amount of income inequality. Top 10% of Lebanese income earners captured 57% of the total incomes earlier in 2014, while the bottom 50% accounted for a mere 11% of the income.

Protests over the Economic Crises

The country and in particular the capital city of Beirut, experienced major protests regarding the surging cost of living, as a result of the worst economic crisis the country has faced since 1975-1990. The recent clashes that began with young men blocking trucks carrying produce to Syria, saw more than a hundred people getting injured as a result of the police’s decision to fire tear gas on the protesters. This action forced the crowd to retaliate by throwing stones and using firecrackers at the law enforcers. In Martyrs’ Square in Beirut, demonstrators dressed in black, with their faces whitened, carried a coffin draped with the Lebanese flag in a symbolic funeral of their country. The government has condemned the protests and the ensuing violence, terming the efforts as a ‘coup’. Protests spread to other corners of the country as well, with protestors coming together in cities such as Saida and Kfar Roummane, in the South.


In the absence of clear leadership for the protests and the large number of demands they encapsulate, it has become all the more difficult to respond to them. There seems to be no sign of a breakthrough in the ongoing difficulties the country is facing. Recent suggestions included the formation of a technocratic cabinet. The idea, however, did not gain momentum, as the suggestion failed to gain support both of the political elite and the common citizens. Financial support from countries such as the United Arab Emirates, Saudi Arabia, and Qatar may be extremely instrumental in pulling Lebanon out of the crisis. With no alternative political leadership or real opposition to the ruling party, protests are said to continue at the current pace and the country may be in for a prolonged period of unrest. 

Ratnadityasinh Chavda

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