Economic crisis in Lebanon since 2019

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The economic crisis in Lebanon is a financial crisis that developed from the persistently low economic strength of the state in 2019. The COVID-19 pandemic (in Lebanon) that will set in in 2020 has further exacerbated the effects of that crisis.

course

The Lebanese pound (LBP) has been pegged to that dollar since 1997 with a fixed exchange rate of 1507.5 LBP per US dollar. In August 2019, the rate began to deviate from the official exchange rate. In the fall of 2019, the black market exchange rate reached 1600 LBP per USD. This foreign exchange shortage also resulted in 785 restaurants and cafes being closed in Lebanon between September 2019 and February 2020 and 25,000 employees losing their jobs.

The drop in the exchange rate sparked protests in Lebanon that ultimately led to the resignation of Prime Minister Saad Hariri and his cabinet.

The newly elected Prime Minister Hassan Diab said when he took office in December 2019 that he would opt for debtor default on the borrowed Eurobonds and that he would seek restructuring in the economic sector, as the country's financial crisis had reduced Lebanon's foreign exchange reserves . Due to the lack of foreign currencies, the Lebanese government was forced to suspend the servicing of the Eurobond liabilities due on March 9, 2020 because of the need for the reserves that were actually intended for repayment. This default became the first in the country's history.

The scientific head of the Lebanese bank Audi stated that Lebanese banks had a total of 12.7 billion US dollars in January 2020 but had 30 billion US dollars in debt in the form of Eurobonds. The Lebanese central bank would hold 5.7 billion and the rest would be owned by foreign creditors. The national debt ratio rose to 170% in spring 2020. Foreign currency inflows slowed and Lebanon's pound depreciated against the dollar and other currencies. The country's commercial banks placed strict restrictions on dollar withdrawals and transfers in order to maintain reserves. As a result, Lebanon's national debt was rated as a junk bond .

By early April 2020, the exchange rate had risen to LBP 3000 per USD. In the same month it rose to 4,500 to one. The exchange rate on the black market continued to rise due to the devaluation of the Lebanese pound and due to the currency shortages in Lebanon. Overall, consumer goods prices rose by 58% from October 2019 to April 2020. The price of the Arab bean dish Ful rose 55% year over year in March 2020. Sugar saw prices rise 67%, while wheat, tea, rice and cigarettes rose almost 50% over the same period. This economic crisis caused Lebanon's gross domestic product to fall from around $ 55 billion in the previous year to around $ 44 billion in March 2020. In addition, the COVID-19 pandemic in Lebanon forced other companies into bankruptcy.

Due to the insolvency, the Lebanese state will not be able to import sufficient fuel in 2020, so that the electricity supply in the country could not be continuously maintained.

With the explosion in the port of Beirut in August 2020, Lebanon recorded billions in property damage, in addition to over a hundred deaths, thousands of injuries and hundreds of thousands of homeless people, according to estimates. At least three hospitals, the power station and a granary in the capital were badly damaged or completely destroyed. One of the most important transshipment centers in Lebanon, the capital's trading port, was inoperable for a week as a result of the explosion.

Individual evidence

  1. ↑ Christoph Reuter, DER SPIEGEL: Lebanon in the Crisis: Keep it Up in Downfall - DER SPIEGEL - Politics. Retrieved August 5, 2020 .
  2. ↑ Christoph Reuter, DER SPIEGEL: Corona, hunger, supply crisis: Lebanon is falling apart - DER SPIEGEL - politics. Retrieved August 5, 2020 .
  3. ↑ a b Lira rate | USD to LBP in Black Market | Dollar to LBP. Retrieved August 5, 2020 (American English).
  4. ↑ a b Statistics of the Banque Du Liban. Retrieved August 5, 2020 .
  5. ↑ Lebanon: 785 Restaurants, Cafes Closed, 25,000 Employees Laid Off .
  6. ↑ a b c d Agence France-Presse: Lebanon to default on debt for first time amid financial crisis . In: The Guardian , March 2020. 
  7. ↑ Chloe Domat: Lebanon: Facing Down A Liquidity Crisis . In: Global Finance , March 2020. 
  8. ↑ a b c d e Sarah Dadouch: Unrest escalates in Lebanon as currency collapses and prospect of hunger grows . In: The Washington Post , April 28, 2020. 
  9. ↑ Lebanese petrol stations shudder to a halt amid nationwide strike. Retrieved August 5, 2020 .
  10. ↑ US dollar shortage and Lebanon's economic crisis. Retrieved August 5, 2020 .
  11. ↑ Lebanon: Currency Drops, Central Bank Sets New Exchange Rate at Transfer Firms .
  12. ↑ Lebanon's GDP declines to $ 44 billion from $ 55 billion | Business, Local | THE DAILY STAR .
  13. ↑ Thore Schröder, DER SPIEGEL: Lebanon in crisis: the lights go out in Beirut - DER SPIEGEL - Politics. Retrieved August 5, 2020 .