2022 Year in Review

T H E S I T U A T I O N
Where there was once a bustling middle class population, the UN now estimates that 80%
of Lebanon is living at or below the poverty line. At the same time, their currency, the Lira,
has lost 95% of its value since 2019, greatly reducing purchasing power while fuelling
hyperinflation. The World Food Programme estimates that food prices have increased by
550% leaving 46% of the nation facing food insecurity. Following a period of capital flight
during the onset of the crisis in 2019, banks placed strict limits on what people could
withdraw. Many are now barred from withdrawing their deposits due to banks facing
bankruptcy.
Lebanese citizens can expect to queue for hours to buy only small amounts of food. Some
are sleeping overnight just to put fuel in their car. Blackouts have become a regular
occurrence, often lasting days. Medical supplies are hard to come by and mostly
unaffordable. Just a few months ago, Bassam Al Sheikh Hussein broke into his local bank
branch with a machine gun threatening to set himself on fire. His father had fallen sick and
he needed to access his savings account holding $210,000 to afford the treatment. The
bank refused to allow him to withdraw. Eventually, after hours of holding up the bank, they
agreed to allow him to withdraw $35,000 (of his own money) and stated they would
facilitate $400 daily withdrawals. The latter they have failed to provide.
H O W D I D S U C H A D I R E S I T U A T I O N
O C C U R ?
W H Y I S I T “ D E L I B E R A T E ” ?
Although the crisis began in 2019, the root of the tragedy can be traced back to the
end of the Lebanese civil war in 1990. Under the Taif Agreement, the end of the war
saw the government split evenly between Christians and Muslims. Under these
conditions, the President must be a Maronite Christian, the Prime Minister a Sunni
Muslim, and the House Speaker a Shia Muslim. Despite the Taif Accords intending this
structure to only be temporary, with a more democratic government as the aim, this
structure still has not changed. What has resulted from it is a dysfunctional sectarian
government that rules a patronage-based system.
Immediately after the war, the government embarked on a major spending spree
aimed at rebuilding infrastructure destroyed by the civil war. Most of this however
was funded through internal loans and supported by a huge trade deficit. A trade
deficit fuelled by imports made possible by the pegging of the Lira against the US
dollar. Investments were also enticed through the lowering of internal tax rates.
Although the scheme was successful and much of the nation was rebuilt it was at the
cost of the development of extensive debt. In 2019, debt was 170% of GDP. In 2021
their debt was estimated to be 183% of GDP, the 4th highest ratio in the world.
Naturally, such a high level of debt left the nation extremely vulnerable to even just a
slight sneeze in global trade.
P A G E 1 4 3