A man counts Lebanese pound banknotes at a currency exchange shop in Beirut, Lebanon, January 5, 2022. (Credit:Mohamed Azakir/Reuters)
BEIRUT — A new World Bank report has declared Lebanon’s post-war economic order bankrupt, saying “it is important for the Lebanese people to realize that central features” of that economic system “are gone, never to return.” The report says that “Lebanon is undergoing a socio-political-economic transition to an as-yet-unknown re-configuration.”
Here’s what we know:
• The study of Lebanon’s public finances from 1993 to 2019 concludes that the ongoing economic crisis was “deliberate in the making over the past 30 years,” engineered by elites who, it says, captured the state for private financial gain that simultaneously allowed them to accumulate political power by supplanting the state in providing services to the public.
• Criticizing the government’s foot-dragging response to the crisis, the report notes that “The poor and the middle class, who were never well-served under this model in the first place, are carrying the main burden of this bankruptcy.” It cites as examples of the fallout from the crisis that has hit average citizens hard: “triple digit inflation rates; hoarding of essential goods; comprehensive power supply blackouts and water supply shortages across the country; collapse of education, health, and other basic services.”
• Inadequate public services like electricity and water are key contributors to both Lebanon’s economic woes and the government’s poor fiscal track record, according to the report. “Dilapidated public service delivery is a principal manifestation of the hollowing of the State,” according to the report, which “is a desired/deliberate outcome intended to cement public-private privilege for principal benefactors of Lebanon’s post-civil war economy.”
• The authors also lambast the Lebanese government for failing to “engage seriously in the macro-fiscal, financial, and sector reforms the World Bank has been stressing for decades.”
• Apart from the Lebanese government and financial sector’s failings, the report notes that “geopolitics” is a “critical element” to “understand the roots” of the current crisis, but says that it is “beyond the scope” of the report.
• The authors project that the country’s debt-to-GDP ratio will reach 272 percent by the end of the year under a “no policy action” scenario. Under that scenario real GDP is projected to decrease by 6.5 percent in 2022, falling to $14.162 billion down from a pre-crisis high of $55.276 billion.
• The report is the work of an international team of World Bank staff as well as outside contributors including the head of Citizens in a State (MMFD), Charbel Nahas.