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Lebanon’s economy and currency crisis

Since the late civil war, Lebanon has been on a downward diving roller coaster. However, the global health crisis manifested in the coronavirus made things extra worse for the Lebanese citizens. Everyone is suffering as the economy continues to collapse. Yet, the corrupt government is still doing nothing but give empty promises. The final nail in the coffin was the devastating clash of currency that took place on 11 June. 

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The Lebanese pound

Ever since 1997, the Lebanese pound maintained a stable currency despite the economy facing many challenges over the years. However, 2020 was the year things started to change for the worse. The country states that the official peg of 1,507 L.L. is 1 USD.  Despite that, the currency was collapsing slowly from the start of 2020 even before the pandemic. The local markets and currency cashiers started pegging 3000 LL to 1 USD, thus decreasing the currency value by half. This trend increased as the pandemic struck its vicious teeth in Lebanon. Every other day, the currency’s value would increase or decrease but never quite reach the official peg value. However, on June 11, the country witnessed the worst currency crisis as the exchange rate tumbled to 6,000 per dollar on the black market. 

The citizen’s reaction

The incident ignited the flame to renew the nationwide protests. Thus, once again protestors filled the streets. However, unlike previous protests, they weren’t peaceful at all. People were rightfully angry, frustrated, hungry, and scared as they closed Lebanon’s roads and burned tires. They threw stones and fireworks at police which retaliated by using tear gas to disperse the angry crowd.

In central Beirut, people gathered while chanting against sectarianism. There, they started riots,  defaced shop fronts, and set fire to stores.

Moreover, other riots took place in the northern city of Tripoli. Demonstrators threw stones and Molotov cocktails on the soldiers. They also succeeded in damaging the facades of several banks and shops. Thus, the army had to disperse hundreds of protesters and respond with tear gas.

Furthermore, The Operations Room of the Lebanese Emergency and Relief Agency announced on Saturday morning that at least 33 protestors were harmed during these clashes between them and the Lebanese army. Also, 2 soldiers were reported wounded. The army arrested many of the protesters.

Economy crisis

In just some mere weeks, the local currency lost nearly 70 percent of its value. Moreover, Lebanon is not only suffering from a great dollar shortage, but also from negative economic growth. Thus, for a country that heavily relies on importing basic goods, this is very bad. 

For the past decades, Lebanese citizens and foreign used the dollar and the Lebanese lira interchangeably. Therefore, with the abrupt currency drop, employees just witnessed their income and savings lose more than 60 percent in value in weeks.

Furthermore, over the course of this year, employment rates have soared to 35 percent. Hence, the Lebanese middle class is rapidly shrinking all while poverty is increasing.

Government’s response

On Friday, Lebanon’s Prime Minister Hassan Diab held an emergency Cabinet meeting after hours of the protests. Then, President Aoun announced that the current currency plunge is due to “political manipulation,” which intentionally aimed to create chaos and undermine the government.

House Speaker Nabih Berri told reporters after meeting with Diab and President Michel Aoun that the government will take the needed steps to lower the pound’s exchange rate within the following weeks.

In brief, 2020 has crushed the Lebanese middle class. People are suffering, frustrated, and angry as poverty continues to prevail in the country. Moreover, it is going to be hard to get out of this currency crisis. Though the following weeks will determine if the government will deliver any real results.

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References:

Wright, K., & Bitcoin-Friendly Top US Banking Regulator Aims to Solve Banks. (2020, May 04). Lebanese Currency Collapse: Failed Policies Led to Economic Meltdown: News Bitcoin News. Retrieved June 14, 2020, from https://news.bitcoin.com/lebanese-currency-collapse-economic-meltdown/

D. (2020). Lebanon Vows to Stabilize Currency After Night of Angry Protests. Retrieved June 14, 2020, from https://www.bloomberg.com/news/articles/2020-06-12/lebanon-protests-reignite-as-currency-plunges-on-black-market

Hundreds protest against the Lebanese pound devaluation. (n.d.). Retrieved June 14, 2020, from https://www.dailystar.com.lb/News/Lebanon-News/2020/Jun-13/507405-hundreds-march-in-beirut-ahead-of-diab-address.ashx

Al Jazeera. (2020, June 13). Lebanon currency crisis: Dozens hurt in the second night of clashes. Retrieved June 14, 2020, from https://www.aljazeera.com/news/2020/06/lebanon-currency-crisis-dozens-hurt-night-clashes-200613054206453.html