Lebanon: Civil War to Coronavirus

Beirut, Lebanon holds the sobering contrast between its beautiful, picturesque mountains, iconic olive groves, the Mediterranean Sea and the intense suffering of its people due to the violent and devastating conflicts that surface from the religious, ethnic, and political conflicts of the region that change the lives of everyday people trying to take care of their families. The government’s proposition to tax the use of certain internet services incited months of protests that grew to embody the pain borne by the Lebanese people for decades. Beginning in October of last year, these protests advocated to overthrow the elite political class that ruled the nation through unbridled corruption and clientelism meaning a political system of patronage. The demonstrations showcased the perpetual frustrations endured by the Lebanese people over the failure of the exploitative system to provide jobs, affordable health care, education, and basic services such as electricity and water. In an article in the Jerusalem Post, Lebanese journalist Mahsen Mursel describes the actions of the government saying, “Instead of carrying out reforms to adjust public debt and build a competitive economy that would promote investment, it began to impose additional taxes on people. The most recent was on WhatsApp, which is what led to the explosion of the people.” 

The blockades created by the protesters caused the halt of the country’s basic functioning, including the closure of banks, schools, and numerous offices. The strength of the protests, encompassing almost a quarter of the population, forced the resignation of Prime Minister Saad Hariri at the end of October last year. However, the protests continued in earnest chanting “all of them means all of them”, which embodied their intention to remove the entire ruling class, not just the Prime Minister. The protests united Lebanese citizens from every one of their 18 officially recognized religious groups, all suffering from the mismanagement and corruption of their sectarian government. 

Five months later, the country continues to be weighed down by mounting debt, currently reaching 161.8% of GDP according to estimates made by the International Monetary Fund. This distressing national debt to GDP ratio, resulting from years of corruption, waste, and inefficiency, ranks as one of the highest in the world. The staggering negative trade imbalance and GDP growth rates approaching zero contribute to the continual expansion of the national debt. Capital inflows from foreign nations have slowed as investors witness the political turmoil intensified by the protests. The value of the Lebanese currency decreased sharply against the dollar from 1,507.50 pounds per 1 dollar to as much as 2,500 pounds. The banks also instituted restrictive money controls to prevent individuals from removing their money amidst the crisis. The massive influx of refugees from the Syrian Civil War further strained the weak and unstable economic and political system. 

On March 7, 2020, only 45 days after he assumed his position, Prime Minister Hassan Diab announced that Lebanon would have to default on its $1.2 billion dollar Euroloan. This decision represents the first time that Lebanon has ever defaulted, even amidst the country’s bloody 15 year long civil war beginning in 1975. The prime minister cited the depletion of the foreign currency reserves caused by the financial distress of the nation as the driving factor pushing the Lebanese government to default in order to hold onto these funds. He tried to reassure creditors and Lebanese citizens stating, “the Lebanese state will seek to restructure its debts, in a manner consistent with the national interest, by entering into fair negotiations ... with all creditors.” Various sources and economists reinforce the importance of a deal with the International Monetary Fund as the only way forward. A small team from the IMF met with the Prime Minister and various other senior government officials two weeks prior to discuss challenges to economic reformation for Lebanon. According to the IMF Press Briefing on March 12th, Director of IMF Communications Gerry Rice stated that the Lebanese officials have not requested any financial assistance from the Fund. He continued, “given the severity of economic conditions in Lebanon, it's important that the Government designs and implements promptly, a comprehensive package of reforms, to effectively address the economic challenges, and improve Lebanon's economic prospects.” He finished by asserting that the IMF would be willing to assist Lebanon with these reforms. 

Only 8 days later, Lebanon would be declaring a medical emergency resulting from the disease that has been sending the global economy into a spiral: COVID-19. Combatting the expansive spread of the coronavirus demands shutting down all non-essential services in the form of a national lockdown. Extending its lockdown until April 12th, Lebanon faces further devaluation of its currency, limitations to its imports vital to the economy, slowing of its national output, and consequently rapidly growing poverty. The grim impact of COVID-19 on an already struggling economy coupled with a government lacking a concrete plan to reform it leaves the Lebanese people with unsettling trepidation for their nation’s future. However, their resiliency and unification across religious sectors to demonstrate their desire for change may offer a possible avenue for positive reform if the government can work to eliminate corruption and institute necessary economic reforms. 

Sources:

Aljazeera. Lockdown piles more misery on Lebanon's beleaguered currency. 1 April 2020. https://www.aljazeera.com/ajimpact/lockdown-piles-misery-lebanon-beleaguered- currency-200401144558690.html

BBC News. Lebanon protests: New government ends months of deadlock. 22 January 2020.  https://www.bbc.com/news/world-middle-east-51189782

Human Rights Watch. Lebanon: Events of 2019. https://www.hrw.org/world-report/2019/country -chapters/lebanon#4694c7

International Monetary Fund. A Statement on Lebanon by Gerry Rice, Director of the IMF’s Communications Department and IMF Spokesman. 25 February 2020. https://www.imf.org/en/News/Articles/2020/02/25/pr2067-lebanon-statement-gerry-rice

International Monetary Fund. General Government Gross Debt: Percent of GDP. 2019. https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/A DVEC/WEOWORLD/LBN 

International Monetary Fund. Transcript of IMF Press Briefing. 12 March 2020. https://www.imf .org/en/News/Articles/2020/03/12/tr031220-transcript-of-imf-press-briefing

France-Presse, Agence. Lebanon to default on debt for first time amid financial crisis. The Guardian. 7 March 2020. https://www.theguardian.com/world/2020/mar/07/lebanon-to-default-on-debt-for-first-time-amid-financial-crisis

Vohra, Anchal. Lebanon Is Broken. So Are Its Protests. Foreign Policy. 18 February 2020. https://foreignpolicy.com/2020/02/18/lebanon-protests-politics-leadership/.

Yee, Vivian. Lebanon’s Prime Minister, Saad Hariri, Steps Down in Face of Protests. 29 October 2019. https://www.nytimes.com/2019/10/29/world/middleeast/saad-hariri-stepping-down- lebanon.html.