Lebanon’s Deepening Economic Crisis exacerbates After Beirut Blast

~ SOHIL SAINI

In recent years, Lebanon has been battling with one crisis or another — be it political instability, a crumbling economy or the pandemic . The devastating blast at the port of Beirut on Tuesday ,4th August'20 ,has worsened Lebanon's economic crisis . According to the Lebanese officials, around 200 people were killed and thousands of them were left injured .

Moreover, the blast also damaged large parts of commercial Beirut, that lead to a GDP contraction of around 20-25% this year - far beyond the IMF's recent forecast for a 12% decline due to a deepening economic and political crisis .In recent weeks, the government has been consulting with the International Monetary Fund. A financial crisis had already led Lebanon to enter negotiations with the International Monetary Fund in May this year after it defaulted on its foreign currency debt. Lebanon is also ranked 137th out of 180(180 being the worst) countries on Transparency International's 2019 Corruption Perceptions Index.

Even before the blast, it was evident and was already predicted that the economy of the country will crash to no end. Its public debt-to-gross domestic product i.e. what a country owes compared to what it produces was the third highest in the world; unemployment stood at 25%; and nearly a third of the population was living below the poverty line. The people weren't even getting their basic necessities. They had to deal with power cuts, a lack of safe drinking water, limited public healthcare and some of the world's worst internet connections. Many blamed the ruling elite for the situation as the government constantly failed to fulfil the aspiration of the citizens of the country.

Lebanon's financial crisis came to a head last October as capital inflows slowed down and protests erupted over corruption and bad governance, with a hard currency liquidity crunch leading banks to impose tight curbs on cash withdrawals and transfers abroad.

According to Jason Tuvey, senior emerging markets economist Capital Economics: "It’s highly unlikely that Lebanon will be able to unlock the financing that it needs to overcome its fundamental economic problems. Some partners may be reluctant to provide support given the influential role of Iran-backed Hezbollah in the Lebanese government,"

In this present state of crisis, Lebanon not only requires international aid and competent leadership but also a way to reform it’s deeply corrupt and unchanging institutions. The government have to make strenuous efforts to secure the financial and economical power to get the country back on its respective feet.

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