Since the explosion in Beirut’s port on the 4th of August there have been at least 137 deaths, thousands injured and over 300,000 people displaced. Although the cause of the catastrophe that set 2,700 tonnes of ammonium nitrate – stored in an unsecured warehouse for the past 6 years – to explode is yet to be identified, it has been estimated that the repair of all damages will be in the billions of dollars. A giant figure that will only add to the country’s exacerbating financial and economical crisis.
Now hospitals are flooded with people in desperate need of medical attention, civilians have opened their houses up to those who have been left homeless and search parties are trying hard to locate bodies under rubble and in the Mediterranean Sea.
Responses
President Aoun announced that the Lebanese government would release 100 billion Pound (66m USD) of emergency funds. The country’s Central Bank will approve interest-free loans for five years to individuals and companies who have been affected by the blast. In addition, Lebanon will receive international assistance to help recover from the catastrophe. But will this be enough considering the country is facing the worst financial crisis in its history, prior to the blast and Covid-19, both of which have only added to the exacerbating conditions.
By looking at the backdrop of the Lebanon’s crisis before the blast, we can make sense of why it may take years, to recover from the disaster.
2019 Revolution
Before Covid-19, Lebanon was facing several national issues that led its people take on to the streets in protest against:
- A corrupt political elite
- Constant electoral fraud and bribery
- Dysfunctional national institutions
- Inadequate access to electricity and water
- Absence of basic services like rubbish removal
- High rates of unemployment
To add insult to injury, the government decided to add tax on WhatsApp calls, triggering “Thawra” in October 2019 – a massive and long-standing multi-sectarian demonstrations demanding change.
The protests throughout Lebanon were driven by the country’s deep social and economic crisis, which has roots that date back to decisions made after the end of the Lebanese 15-year civil war in 1990. One of those decisions being the pegging of the Lebanese currency to the US Dollar.
One Country Two Currencies
After the civil war, Lebanon’s economic strategy was to attract investors and tourists, and to boost the services’ sector. In order to attract such attention, the government pegged the Lebanese Pound to the US Dollar in 1997 to reassure the world that Lebanon was a safe investment. But this was never sustainable.
For over 20 years, Lebanon’s Central Bank kept a fixed exchange rate: 1,507 LL to 1 USD, which kept imported goods affordable as the country is heavily reliant on them. However, throughout the years, there was continuous instability provoked by a corrupt government. A ‘Ponzi scheme’ that enticed commercial banks to make large deposits of U.S. dollars with high interest rates that could be covered only by bringing in more large depositors with even higher interest rates. The government’s mishandling of the nation’s economy and its most powerful and unruly political party, Hezbollah, pushed away foreign investment and prevented long term growth.
This eventually took a tall on Lebanon; as last year, the country’s banks ran out of money. Expats and loans from countries such as Saudi Arabia stopped coming in, while government dysfunction exhausted its remaining resources. To keep the government afloat and pay off public debts, private banks loaned money to the government which came from US dollars that Lebanese workers put into their accounts as they use both currencies – meaning the banks’ customers lost their savings.
As the banks lost billions of dollars, causing the devaluation of the Lebanese Pound against the U.S Dollar; this had a knock on effect on the country’s poverty and unemployment rates.
Inflation
Since October 2019, the Lebanese Pound was devalued by 80%. The inflation rate is currently the 3rd highest in the world and prices of basic necessities have skyrocketed as food prices have risen by an average of 55%. For example, in 2019 a pound of butter would have cost 4,000 LBP, now it costs 16,500 LBP.
Unemployment rates are at 25% and about a third of the country lives below poverty line. Now inflation rates are making matters worse as people struggle to afford the basics. Weeks before the Beirut blast, it was clear how much of an impact the financial crisis was having on the Lebanese people:
Bread, a staple of the Lebanese diet, is in short supply because the government can’t fund imports of wheat. Essential medicines are disappearing from pharmacies. Hospitals are laying off staff because the government isn’t paying its portion, and canceling surgeries because they don’t have electricity or the fuel to operate generators. – Washington Post
Impact on Imports and Health System
The port of Beirut is the ‘beating heart’ of the country as 80% of its goods are imported, keeping the economy alive. Now that the port has been reduced to rubble and made dysfunctional, it will threaten food security and hit those in poverty the hardest – particularly the 20% of Lebanon’s 7 million population that are refugees, mostly from Syria, which had little to begin with.
Hospitals were already suffering from under-funding, medical shortages and Covid-19. The destruction of some Beirut hospitals and overwhelming casualties from the blast only adds to its overstretched health system and will struggle to reach everyone in need.
These are just a couple of ways Lebanon will be impacted by the blast and its people pushed to the edge of their suffering under a corrupt government that denies them adequate rights.
The future of Lebanon is distressing. How will the country recover from what has been identified as the third biggest explosion in world’s history when it was already suffering a major national crisis? Will the Lebanese find themselves in a similar situation they were in during the 1915-18 Great Famine of Mount Lebanon? Nothing is certain apart from the fact that the Lebanese people are in desperate need.
Suggestions
The Lebanese people can’t rely on its government to recover from this disaster, making those in need of relief heavily reliant on charitable donations. It’s deeply saddening seeing Lebanon go through such turmoil, which is why international communities need to step up to help everyone suffering. Below are some organisations to donate to:
- Disaster relief for the explosion
- UN Global Impact
- Lebanese Food Bank
- Elderly and youth aid
- Lebanese Red Cross
Sources
CNBC – Beirut damage is in the ‘billions’
Middle East Eye – Beirut Explosion: How the port blast will hit Lebanon’s economy
The New York Times – Bartering Child’s Dress for Food: Life in Lebanon’s Economic Crisis
The Washington Post – Lebanon’s economic crisis didn’t happen overnight
The Washington Post – The lights go out on Lebanon’s economy as financial collapse accelerates
Vox – Lebanon was already in crisis
Vox – What Lebanon needs to recover from the explosion
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