The economic meltdown in Lebanon has led to a major shift towards a cash-based economy. With zombie banks freezing depositors out of their accounts, businesses and individuals have been forced to rely on cash transactions. Most restaurants and shops have now stopped accepting credit cards and are instead accepting U.S. dollars, with mobile apps being used to check on the rapidly declining value of the local currency.
Lebanon is also set to adopt a new official exchange rate of 15,000 pounds per U.S. dollar on Feb. 1, central bank governor Riad Salameh said, marking a 90% devaluation from its current official rate that has remained unchanged for 25 years.
The use of cash has had a significant impact on the country’s economy, with a twelve-fold increase in the amount of local currency in circulation between 2019 and 2022. This has led to a rise in crime and an increase in the sale of safes, with business owners documenting large transactions by taking pictures of the dollar bills used.
Despite the challenges faced by the Lebanese economy, some businesses are still struggling to adapt. Importers like Omar Chehimi, for instance, are facing difficulties obtaining letters of credit for large shipments.
The government has considered requiring traders to pay newly-increased customs tariffs partly in cash, but any recovery is dependent on addressing the losses in the financial system and restoring the banking sector. With politicians and bankers resisting reforms sought by the International Monetary Fund, the future of the country’s economy remains uncertain.
Since 2019 as Lebanon plunged into a financial crisis following decades of expensive wars coupled up with bad spending decisions, cryptocurrencies have become increasingly attractive as they operate outside the reach of bankers and politicians. Lebanon’s currency which has lost over 95 per cent of its value since August 2019 has meant that pensions and wages are almost worthless.
Over the last several weeks, protesters in Iran took to the streets to express their discontent over continuous economic struggles and a looming water crisis. The Middle Eastern country’s economy is in shambles thanks to ongoing Western sanction regimes and the economic fallout caused by the COVID-19 pandemic. The latest string of water shortages has underscored and exacerbated these financial issues. Iranians are growing more dissatisfied by the day, signaling that the government needs to implement meaningful changes soon.
Iran’s economy is currently at one of its lowest points. After the United States withdrew from the Iran nuclear deal in 2018, it reimposed stringent sanctions on Iran. This resulted in a sharp decrease in foreign investment and oil exports. The 2020 COVID-19 pandemic further exacerbated Iran’s economic woes. Recent estimates indicate that Iran is one of the hardest-hit Middle Eastern countries, as more than 89,000 Iranians have died from the coronavirus. The deadly virus has spread throughout Iranian society, even infecting those at the highest level of government. Iranian hospitals are nearing the brink of collapse, and due to sanctions, the country has struggled to obtain access to the necessary medical supplies to combat the pandemic. Today, inflation in the country is over 50%, unemployment is staggeringly high, and many workers have reported not receiving wages for several weeks.
Simultaneously, Iran is suffering through its worst drought in 50 years. In May, Iranian Energy Minister Reza Ardakanian warned the government that the country would face water shortages during the summer. Despite this, the regime has done little to prepare, sparking ire among Iranians. Iranian authorities have attributed the water crisis to low levels of rainfall. Experts have noted that recent rainfall levels were 40% lower than the rainfall levels from last year. As a result, many hydroelectric power plants have been unable to operate. Rising demand for electricity to fuel appliances such as air conditioners during the summer has resulted in numerous power blackouts. Iranians have also pointed to a legacy of government corruption and mismanagement that has shaped and fostered the water crisis. The ongoing crisis has significantly impacted agriculture and livestock farming, contributing to further economic stress.
In response to these economic and resource crises, Iranians across the country have begun protesting. On July 15, protests broke out in Iran’s oil-rich province of Khuzestan after many days of severe water shortages. As protests turned violent, one person was killed, sparking even more anger. The demonstrations in Khuzestan follow numerous similar uprisings across the country as Iranians demand changes to the country’s economic and political system. In addition, over the past several weeks, thousands of individuals working in Iran’s energy and oil sector have begun to protest, advocating for higher wages and better working conditions amid growing stress on the industry. Reports indicate that many protesters across the country have been chanting phrases such as “water is my right,” Death to the dictator,” and “Death to Khamenei.”
Iranians are growing increasingly discontent with the country’s economic and resource scarcity crises. Over the past several weeks. Iranians have taken to the streets to express their frustrations, calling on the government to do more to address the dual crises. The regime must implement meaningful structural changes or step aside and empower a government that will.
Under the leadership of Crown Prince Mohammed Bin Salman Al Saud, Saudi Arabia has launched several new megaprojects. One notable initiative is Jeddah Economic City, which will result in the construction of the world’s tallest tower — Jeddah Tower.
Jeddah Economic City is one of Saudi Arabia’s flagship megaprojects. Outlines for the city indicate that 210 towers that are over 30 floors high and numerous features will be built to foster an economically and environmentally friendly atmosphere. The city is being constructed in line with the recently announced Saudi Green Initiative, which seeks to increase the amount of green space in the country, while also increasing the use of renewable energy, reducing carbon emissions, and planting more trees.
Jeddah City will be divided into three districts: A financial sector, a residential sector, and Al-Balad, which will recreate segments of old Jeddah. Throughout history, Jeddah has been a vital relief stop for Muslims going on pilgrimage to the holy city. As such, the Al-Balad district could reflect many of the architectural and cultural traits that Jeddah has adopted over the past centuries. In addition, the city will be home to Jeddah Tower, which is slated to be 1 kilometer tall. The tower is set to overtake Dubai’s Burj Khalifa as the world’s tallest building. According to recent reports, approximately 90% of road construction and landscaping work for the city has been completed.
Since 2016, Saudi Arabia has invested significant resources to achieve the modernization, and economic development goals in the Saudi Vision 2030, which seeks to reshape Saudi Arabia’s economy to avoid a dependence on foreign labor and oil. However, in some ways, the construction of flashy and tech-savvy new cities and spaces fails to address some of the economic necessities of Saudi citizens. Last year, the COVID-19 pandemic and the subsequent national lockdown resulted in citizen unemployment rates rising to 15.4%, though this figure has decreased as the Kingdom opens up. In addition, Saudis have been struggling with widening inequality, especially after the government tripled the value-added tax on goods and services during the pandemic, and inflation soared.
As Saudi Arabia continues down the path of modernization, economic recovery is just around the corner. Projects like Jeddah Economic City and Jeddah Tower will be shining beacons of the Kingdom’s progress.
Lebanon is currently facing a severe financial crisis, and its population is struggling to afford food and other necessities. The ongoing crisis has particularly taken a toll on already marginalized and vulnerable groups, such as farmers, women, and those within the low socioeconomic framework.
Lebanon’s current economic state can be attributed to a plethora of events. After the Lebanese Civil War, which took place between 1975 and 1990, the Lebanese government introduced macroeconomic policies that radically transformed the economy’s structure. As a result, Lebanon’s economy became highly dependent on imports, and local production was discouraged. This fostered a strong dependency on foreign currency flows, particularly dollar flows. The Lebanese government also accumulated significant debt to modernize and develop the country, which benefited the country’s elite. However, their untethered borrowing, coupled with corruption and mismanagement, fostered considerable income inequality and set the country’s economy up for disaster. In 2019, inflows of dollars declined significantly, sparking an economic crisis that the COVID-19 pandemic has further exacerbated. According to the World Bank, the situation in Lebanon is considered one of the worst economic depressions in recent history.
The ongoing crisis has especially taken a toll on Lebanon’s farmers. Over the last two years, the Lebanese pound has lost approximately 90% of its value. These staggering inflation rates have made it prohibitively expensive for farmers to import materials such as fertilizer, seeds, and animal feed. Many farmers have been forced out of work, unable to feed their livestock and obtain necessary materials. As the country starves, demand for Lebanese farmers to produce more is rising. However, given the current economic situation, meeting this demand has proven difficult and could result in the adoption of subpar and even dangerous agricultural techniques.
Lebanon’s economic woes have also strongly impacted the country’s women. As inflation rises, so has the price of menstrual pads, most of which are imported. Recent estimates indicate that the cost of pads had risen approximately 500% since the beginning of the crisis. Given that over half of Lebanon’s population is now living in poverty, thousands of women are now forced to seek out alternatives.
The price of other everyday necessities, like bread, has also skyrocketed. During the earlier parts of the crisis, the Lebanese government provided subsidies for some essential goods, including medicine, fuel, and flour. However, as the crisis worsened, the government rolled back these subsidies. Earlier this month, the government raised the price for bread for the seventh time this year, as wheat imports have become more expensive. Similarly, as the price of imported fuel rose, fuel subsidies decreased. As a result, hospitals and the airport have resorted to rationing fuel and electricity use. Many pharmacies have also refused to operate, as they lack access to critical imported medicines. In an effort to combat Beirut’s growing inequality, basic necessities are now prohibitively expensive for most citizens. The government recently introduced ration cards for the country’s poorest, but the rising unemployment rates and ongoing government inefficiency have painted a bleak picture of the country’s economic future.
Iraq’s population is currently the fastest-growing in the world, and the nation’s Prime Minister has called for expanding economic opportunities in the oil-dependent country. Iraqi Prime Minister Financial Affairs Adviser, Mazhar Mohammed Saleh, stated that there needs to be a renewed focus on investment in manufacturing, tourism, and service areas, among others.
At a population growth rate of 2.6 percent annually, which is the highest throughout the world, the current trend of oil-dependency through 2050 could not be diverse enough for this expanding populace.
Currently, oil accounts for 45 percent of the nation’s Gross Domestic Product (GDP), or the amount that a country produces of all goods and services. A diverse economy is one that provides opportunities for growth and wealth development for its citizens, whereas an economy that is heavily dependent on one sector limits these opportunities for growth.
Saleh stated that “More than 8 million Iraqis receive salaries, a pension, a grant or a social benefit from the state,” which means that oil revenues account for a significant portion of the support people depend on. However, in times of crisis, like the coronavirus pandemic, these people suffer economically.
There are currently 40.1 million Iraqis, as tallied at the end of 2020. This is according to information provided by the Ministry of Planning. Current unemployment rates sit at about 23 percent.
When oil prices globally are high, oil-dependent nations prosper. However, when global oil prices drop, which they have done for the past year and a half, then those same economies suffer.
With the ongoing price slump, some Iraqi regions are turning back to farming, a sector that had been neglected for many years. This is especially true in the northern Kurdish regions of the country.
Vineyards in these northern regions are coming back to life for the first time in nearly two decades. Locals have realized it is better to return to these less lucrative means of survival rather than wait for things to turn around in the oil industry.
Iraq has also been looking to foment stronger ties to some other Mid-East nations, most notably Egypt and Jordan. One commentator noted that this latter relationship -Egypt, Jordan, and Iraq- was like the ‘region’s odd fellows.’ But Iraq has long maintained economic ties to these neighbors, and part of that is built-in economic benefit for each.
During the Iran-Iraq War, Jordan was an economic lifeline for Iraq. Most of Jordan’s oil came from Iraq and Egypt witnessed about one million of its citizens emigrate to Iraq during that same time period of the 1980s.
Now, though, with these mediation steps and rebuilding of stronger relationships with its neighbors, Iraq is taking concrete steps into its future, recognizing the importance of diversifying its production and services.
Iraq is emerging from decades of tumult with a population boom. If the nation wishes to not only survive but thrive, it must be willing and able to diversify its economy away from oil dependency. By diversifying, Iraq could very well become a critical player in peace and prosperity throughout the Middle East.
