On Tuesday, the Lebanese pound plunged to 15,000 against the dollar, a new sign of Lebanon’s near-total economic collapse, as well as the inability – sometimes unwillingness – of most of its politicians to do anything about it. A state’s ability to function is equal parts a matter of politics and economy. In Lebanon, both are in total disarray.
Banknotes and coins are more to a nation than legally binding pieces of paper and metal. In many countries, currency denotes a promise to “pay the bearer the sum” of a certain amount, a simple enough function. Nonetheless, in the UK, for example, preserving the deeper symbolism of the national currency was deemed so important by some citizens that it sparked an entire political movement to protect it against the EU-wide rollout of the Euro in 2002.
When it comes to the Lebanese pound, there are more pressing issues to worry about. The World Bank now considers half of all Lebanese citizens to be living in poverty. In less than a month, the pound has nosedived by 50 per cent. A lack of hard foreign currency reserves, so important for a state that relies heavily on imports, means many do not have access to essentials goods, such as food and medicine. The nation faces a crisis in debt, fiscal spending and in its once-leading banking sector, which had previously given it the nickname the “Switzerland of the Middle East”.
Lebanon’s descent is a reminder how bad things can get, particularly in resource-poor and politically volatile countries, particularly in the Middle East
The Lebanese economy of today operates on fragile foundations. Since the civil war ended in 1990, successive governments have shirked dealing with compounding levels of public debt, a result of excessively unsustainable spending. The country’s modern economic model generates insufficient domestic capital, and is instead overly reliant on money coming in from outside, whether through foreign aid, tourism and, most importantly, remittances from Lebanese living abroad.
There are huge levels of corruption, often worst exemplified in the public sector. Fighting corruption is the most common trait uniting protestors on the streets of Lebanon. While enriching themselves, some of the most influential voices in Lebanese politics, largely aligned with Hezbollah, are happy to push narratives that revel in the nobility of poverty and fuel a resistance mentality built on false claims of international conspiracies against Lebanese society.
There are a number of avenues for the government to secure financial help. Organisations like the IMF and various foreign partner countries, most notably France, stand ready to do so. All potential donors have made major reform a condition for any bailout. Unsurprisingly, it has been impossible to enact this change in a political system that lacks the will to improve, given the fact that so many in power benefit from its dysfunction. Any reformer that overcomes this pervasive challenge would still face the near-impossible task of fixing a dysfunctional economy that has been mutating over decades. The prime minister designate Saad Hariri continues to seek cooperation from other political actors to put together a cabinet of technical experts to rescue the economy but is met with stubborn narrow political interests.
Lebanon’s descent is a reminder how bad things can get, particularly in resource-poor and politically volatile countries, particularly in the Middle East. In a domestic system as damaged as this, Lebanon’s people deserve support. Their allies must not give up on them.