The Lebanon economy crisis explained

Lebanon’s financial system is on the brink of collapse, according to the outgoing Minister of Finance Amin Salam, marking another momentous mark in the Lebanon economy crisis . In a press conference held in Beirut, Salam announced that the introduction of prices of consumer goods in US dollars alongside prices of the local pound is one of the last phases of the collapse of the financial structure.

The Lebanese pound’s value has dropped by more than 98% within the last three and a half years, and Salam placed the responsibility for the financial default on the financial class that has ruled the country in the last decades. He explicitly accused those responsible for the Lebanese State.

Salam stated that the old Lebanese finance system is finished, and there is nothing to do except to leave the currency to its destiny. The decision to introduce prices of consumer goods in US dollars is to protect citizens from the chaos and randomness of costs pursued by traders and supermarket owners.

Will the fact that Lebanon has dollarizes its economy help?

The Ministry of Finance also increased the customs dollar from 15 thousand to 45 thousand, one month after abandoning the rate of 1,500 used since 1997. However, the exchange rate of the Lebanese pound continues to plummet in the parallel market and is close to 90 thousand per dollar. World Bank figures show Lebanon ranks third globally in food price inflation, and UN reports place 80% of its population below the poverty line.

The country has entered the fifth month of presidential vacuum amid the repercussions of the interconnected financial, banking, social, and political crises that has worsened the Lebanon economy crisis. Economists and political experts warn of looming economic chaos, and the Finance Ministry’s decision to set the price of the customs dollar at 45,000 Lebanese pounds is an attempt to pay public sector salaries from the state treasury.

Lebanon economy crisis – what’s next?

As the situation worsens, shops and supermarkets have begun to price products in dollars. Economists and political experts predict the Lebanese pound will drop to 100,000 to the dollar soon. Meanwhile, a man stormed a Creditbank branch in southern Beirut, threatening to set it ablaze if denied access to his savings. The man left the bank without getting his money after being assured he would face no criminal charges. At the conclusion of the last government meeting, Minister Salam insisted on the need for the election of the President of the Republic to restore the institutions of the State and promote recovery reforms.

Image Credit: Reuters

Tags : Lebanon