The Uncertain Future of the Lebanese Pound
Lebanon has been facing one of the quickest and worst economic crises of the twenty-first century. The economic crisis began in 2019, but the issue became much bigger than most anticipated with the breakout of the COVID-19 pandemic in 2020 and the Beirut explosion that occurred in the same year. Now, with the Lebanese Pound approaching extreme value depreciation and high unemployment rates, Lebanon is on the verge of economic collapse. With the shaking stability of the native currency and the need for survival amongst the local community, the future and durability of the Lebanese Pound (LBP) is uncertain.
After the Lebanese Civil War in the 1990s, it seemed as though the state was looking forward to a successful future economically, socially, and politically. Tourism was promising, and finances within the borders were doing well, especially with increased activity from foreign investors. This upwards trend took a turn for the worse in 2019 when the economic crisis began.
It soon became clear that after the end of the Lebanese conflict in 1990, the country’s government was formed by a power-sharing agreement, one that is largely attributed to the ending of the war. This newfound political system was soon discovered to be in the midst of a scandal as the government was accused of being involved in a Ponzi scheme.
A Ponzi scheme is a fraudulent system where the swindler asks victims to invest, but the money invested pays previous investors; the bottom rung of people only get paid back if more people join the scam after their initial involvement. Put simply, the fraudulent individual, which in this case is the Lebanese government, continues to make money as those on the bottom of the hierarchy continuously lose finances.
Due to this Ponzi scheme, an excessive amount of debt has accumulated. In 2019 political elites in Lebanon announced new tax protocols in an attempt to fix increasing inflation and the perturbingly large amount of debt that was collected. Lebanese citizens, distressed by political corruption and economic schemes occurring so soon after national conflict, took to the streets to protest the regime. Demonstrations that blocked roads and set cities aflame occurred in multiple locations across the nation, including the capital of Beirut, Sidon, and Tripoli. Less than a year later in August 2020, an explosion that killed over 200 innocent civilians happened in a Beirut port.
The devastating blast was caused by the haphazard storing of large quantities of ammonium nitrate, a component of purposeful explosive mixtures and agriculture. The corrupt political elite are speculated to have known about the dangerous storing of the explosive powder, but failed to share the information to protect Lebanese citizens. The Beirut port explosion only worsened the economic crisis, as damage due to the blast had to be fixed, and an excessive loss of materials for import and export. Paired alongside the Ponzi scheme initiated by the Lebanese government, the Beirut port explosion exacerbated the uneasy tensions found within the country’s political realm.
In addition to the Beirut port catastrophe, the COVID-19 pandemic also affected the economic crisis in Lebanon. Due to the pandemic many became unemployed, and finances were stretched even tighter than before.
The previous Lebanese president, Michel Aoun, left his position in October 2022. Since then the position has been left vacant due to inability to agree on a qualified individual for the role, forcing Lebanon to struggle without a leading figure. Politically, the country is attempting to rebuild a government after the years of corruption that followed the civil war.
The political and economic corruption that led to the Lebanese Pound losing 90% of its value within only a few years; the inflation rate was calculated to 264 percent in 2023. Many working class people have now fallen beneath the poverty line, and low-income households are struggling to stay afloat as the price of necessities continues to rise. The country itself has fallen from an upper-middle income status to a lower-middle income status according to the World Bank.
Until Lebanon is able to stabilize its government, it is likely that the economy will remain in crisis. The inflation rate of the Lebanese pound and the quick development of the crisis is affecting Lebanese citizens at an alarming rate, especially those who were already struggling financially. As the political elite were scamming citizens through the Ponzi scheme they were simultaneously creating a devastating situation for its own working class that has proven extremely difficult for Lebanon to escape.