Lebanon Crisis 2021: The World’s Worst Economic Meltdown

Lebanon has been grappling with an economy that is on a downward spiral, which is plunging the country into another depression. There are many triggers for the downfall of Switzerland in the Middle East, most of them of human origin. The banks and service sectors were paralyzed, the currency crashed, leading to many protests against the government. These protests drove the country into further depression.

The Inception of The Lebanon Crisis 2021

The actual financial collapse started way back in 2019, further sped up by the corrupt government and mismanagement of resources. Thanks to the civil war that ravaged the nation, the country took huge credits to reconstruct the various destroyed industries to rebuild its image of old times.

However, there was a gross underestimation. Most of the country existed on remittances sent by citizens working overseas. It pulled the country through tough times and even through the Great Depression. But remittances started slowing down from 2011 due to the increased instability in the Middle East region and petty governmental squabbles.

The Sunni Muslim states turned away from Lebanon due to the rising influence of Iran through Hezbollah (a heavily armed Lebanese Shi’ite outfit), whose empire grew in the region throughout the years. As the transfers failed to match imports, the budget deficit further skyrocketed.

To get out of the oncoming crisis, the banks in 2016 decided to offer exceptional return rates on new deposits of dollars and even better rates for the Lebanese pound. Given that savers earned a little interest elsewhere, the strategy looked good enough to keep the boat afloat.

However, while the improved dollar flow increased the country’s foreign reserves, it overshadowed a glaring liability, which rose continuously. Additionally, the servicing cost of Lebanon surged to more than a third of the budget spending, raising other warning signals.

Lebanon Economy Falls Down

After Lebanon crisis 2021, it was apparent that the state needed to rein in spending. However, power-hungry politicians splurged the public funds to secure votes and rise to power. However, since the politicians could not deliver on the reforms they promised, billion-dollar aid was held back by the foreign community.

The trigger came in October 2019. The country decided to tax WhatsApp calls. The whole tax system skewed in favor of the rich and the powerful. But the addition of a tax on a commodity that most Lebanese used to keep in touch with family and friends became the last straw for the populace.

The entire country, ranging from the disenchanted youth to the hardened veterans, protested against the elite politicians. As a result, the foreign exchange trickled to a dangerous low before drying up completely. Furthermore, the banks could no longer pay the depositors, and they shut shop.

The currency spiraled down to 15000 against a dollar (from 1500) by June 2021. The problems were further aggravated by the explosion that rocked the world, brought the government down, and leveled the port of Beirut. Lebanon crisis 2021 caused billions of dollars of damage and also took the lives of 208 people. Further, it displaced more than 30000 people.

Current Situation Of The Lebanon Crisis

Present situation of Lebanon after the Lebanon crisis 2021 is good. Ever since the country emerged from the civil war, it tried to regain its lost position of honor. However, the corruption that had seeped deep into the country’s political and bureaucratic mechanism prevented it from doing so. To rake in more capital, the government announced absurd rewards to investors. While this worked in the short term, it continued to hollow the economy from the inside.

Loss of capital led to the inflation of even the most basic necessities, with many Lebanese people drawing firearms over fuel and milk disputes. Moreover, the security, which is the armed forces’ responsibility, is jeopardized even further as the officers’ salaries have gone down beyond what can sustain them and their families.

The scenario is grim and it seems like this will continue for the foreseeable future. However, all is not lost. The country itself holds the key to unlocking the box of miracles.

A New Hope Blooms After the Lebanon Crisis 2021

The country has had one problem since the very inception of the various reforms: self-serving and corrupt politicians. Donors have pledged billions of dollars in aid to the country, provided they can deliver on the reforms that they promised.

The first and the obvious step is to root out corruption from the political class. While this is a huge task, it is also one that we can implement with immediate effect. But the quibbles of the ruling class over positions and logistics prevented any potential rework.

The country’s president allegedly demanded veto powers, which caused a massive uproar amongst the opposition. It further stalled the nation’s healing process. Additionally, the feathers of various ministers ruffled when it came to light that the president is a staunch ally of the Iran backed group, Hezbollah, and was trying to undermine the position of the Prime Minister, which is reserved for a Sunni candidate.

All in all, the country’s ministers are more worried about keeping a hold on their power and clout than rebuilding the nation. The rise of control of the armed group has restricted the supply of aid from the Gulf monarchies. They are alarmed by the growing influence of Iran in the Lebanese space.

The road to recovery is clear. The only obstacles are the people leading the country. Petty and Measly gains have resulted in various stalls, but with the right vision and perseverance, the government can finally end the nightmare that has plagued its citizens for the longest of times. Lastly, this was the Lebanon crisis 2021 that is considered the worst economic meltdown of the world.