Lebanon has been witnessing an economic collapse since 2019, which the World Bank ranked among the worst in the world. The Lebanese pound fell by more than 98%, and the majority of the population became below the poverty line due to severe banking restrictions and an acute liquidity crisis.
And the World Bank stated, in a report yesterday, Tuesday, that “the Lebanese economy is still in a state of sharp decline, and it is far from the path of stability, let alone the path of recovery,” according to “AFP.”
“The failure of the banking system in Lebanon and the collapse of the currency led to the “dollarization” of a monetary economy estimated at half of the gross domestic product in 2022,” according to the bank’s report.
The World Bank estimated the dollarized monetary economy at about $9.9 billion, or 45.7% of GDP, which reflects a rapid shift towards monetary transactions in hard currencies in the wake of a complete loss of confidence in the weak banking sector and the local currency.
And he warned that the monetary economy “threatens to affect the effectiveness of fiscal and monetary policy, and increases the possibility of money laundering, as well as an increase in informal economic activity, and encouragement to increase tax evasion.”
Stores in Lebanon are now pricing their goods in dollars, and several companies are paying the salaries of their employees in cash dollars, due to the tight restrictions imposed by banks on withdrawals.
Many Lebanese depend on the money of expatriates from their relatives, which they receive from hawala companies in US dollars.
The political paralysis that has existed in Lebanon due to the presidential vacuum for more than six months is exacerbating the economic situation.
Lebanon is facing a new crisis today, with a French judge issuing, yesterday, Tuesday, an international arrest warrant against the Governor of the Banque du Liban, Riad Salameh, whose wealth is being investigated by European countries and suspected of being involved in embezzlement and huge money laundering.
The World Bank considered that “policy-making in its current state is still characterized by fragmented and inappropriate decisions to manage the crisis, undermining any comprehensive and fair plan, which leads to the depletion of capital in all its aspects.”
According to the World Bank, the inflation rate reached 171.2% in 2022, making it one of the “highest rates in the world.”
“As long as the economy is in a state of contraction and conditions of crisis exist, the decline in living standards will increase, and poverty rates will continue to rise,” said Jean-Christophe Carré, Regional Director of the Middle East Department at the World Bank.
He added, “The delay in implementing a comprehensive reform and recovery plan will exacerbate the losses.”