Carole Raddato

Lebanon is in the Midst of a Jaw-Dropping Economic Free Fall

Lebanon is in the midst of an economic crisis of enormous magnitude.  The currency is losing value at a rapid clip, inflation is soaring, and commodities are hard to come by. Banks have imposed strict limits on the amount of money people can withdraw and pensions have largely evaporated. Now, widespread hunger is threatening the country.

Lebanon’s economic crisis predates the coronavirus pandemic, though the pandemic is certainly making everything worse.

How Lebanon’s 1990 civil war impacts today’s economic crisis

Lebanon emerged from a fifteen year civil war in 1990. The agreement that ended the civil war, known as the Taif Agreement, created a unique political system. This agreement allocated certain top government officials to each of the three dominant religious groups: Christians, Sunnis and Shias. While this may have been an effective strategy to end a brutal civil war, this system does not lay the foundations for a stable political system.

As Maha Yayha, director of the Carnegie Middle East Center, explains this agreement simply entrenched the various militias who fought in Lebanon’s civil war in positions of government. In some cases, they used those positions to enrich themselves and their allies without much regard to governing well. Over time, corruption, mismanagement and overall weak government has lead to widespread discontent among the Lebanese people.

In October 2019 a proposed tax on the popular messaging service WhatsApp sparked protests, which eventually lead to the resignation of the Prime Minister in January.

Since then, the Lebanese government has been struggling to manage a spiraling debt crisis and in March defaulted on its sovereign debt. In April, the government signaled that it would seek a bailout from the International Monetary Fund. But IMF loans come with strings attached and it is entirely unclear whether or not the government of Lebanon is willing or able to meet those conditions.

I caught up with Maha Yahya from Beirut, where like much of the world she was on a COVID-19 lockdown. We kick off discussing the roots of this economic crisis, which she explains can be traced to the political arrangements that ended the civil war 30 years ago.

We then have a broad conversation about the impact this economic crisis is having in a country that is already incredibly fragile. And given Lebanon’s strategic location in the middle east, the fact that it hosts so many refugees, and it’s history of conflict, fragility in Lebanon could have broad international implications.

If you have twenty minutes and want to understand Lebanon’s economic free fall, have a listen

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