Nadine Wadalla and Yousef Sabah
DUBAI, Reuters – Tuesday’s World Bank attack on the ruling classes of Lebanon was directed at them for orchestrating one of world’s most severe national economic depressions. This is due to their exploitation on natural resources.
The global lender said the nation’s elite https://www.reuters.com/world/middle-east/lebanon-deputy-pm-talks-with-imf-focus-budget-banking-sector-exchange-rate-2022-01-24 were still abusing their position despite Lebanon suffering possibly one of the three biggest financial crashes globally since the 1850s.
“Lebanon’s deliberate depression is orchestrated by the country’s elite that has long captured the state and lived off its economic rents,” the World Bank said in a press release attached to a report on the Lebanese economy https://openknowledge.worldbank.org/bitstream/handle/10986/36862/LEM%20Economic%20Monitor%20Fall%202021.pdf?sequence=2&isAllowed=y.
The release stated, “It has become to threaten the country’s long-term stability & social peace,” echoing the sentiments of the public that have provoked angry protests over the past years.
Due to massive debt, and the inexplicable way that it was funded, the crisis has decimated Lebanon’s Gross Domestic Product (GDP), which fell by 58.1% from 2019 to $21.8 billion by 2021.
Millions more people have been forced into poverty in a country already one of the least equal. According to the World Bank, those living below the poverty line will see an increase of up to 28 percentage point by 2021. This follows an increase of 13 percent in 2020.
The bank stated that the 2021 drop in government revenues was almost 50%, reaching 6.6% of the GDP. This is the third-lowest ratio worldwide after Somalia or Yemen.
According to the report, real GDP fell by 10.5% in 2013. Gross debt reached 183% of GDP. This ratio is only bettered by Japan, Sudan, and Greece.
Saroj K. Jha, World Bank’s Mashreq regional director said “Deliberate Denial” and that it is causing long-lasting damage to the economy.
“Lebanon has not been able to find a viable path towards economic and financial recovery even after two years of financial crises.”
According to the World Bank, while financial stability improved for government in 2021 due to an increase in revenue, it was due to lower spending.
The fiscal deficit projected by the government will be 0.4% of 2021, down from 3.3% last year. This is due to a rebound in tourism. The number of arrivals rose by 101.2% during the first seven months last year, despite being still affected by the pandemic.
The World Bank stated that there was a significant eroding of reserves due to a sudden stop in capital flows and large current account deficits.
The IMF began Monday talks in Lebanon with Beirut, in hopes of securing a bailout. Beirut had failed to get one since 2020. No sign has emerged that the donors are pursuing long-delayed reforms.
The World Bank stated that “This elite controls the major economic resources, creating large rents and splitting the spoils from a dysfunctional government.”
Many people in Lebanon, including former leaders of militias and members from wealthy families who wield influence over Christian and Muslim communities for many generations often accept that there is corruption. They generally ignore individual responsibility, and claim they will do their best to save the economy.
Financial system losses are severe due to the crisis, with the total estimated loss by the government as $69 billion.
According to the World Bank, “Worryingly important public and private players continue to refuse recognition of these losses, perpetuating a zombie-like economy”.
Lebanese exports could have been helped by the plummeting exchange rate. Since 2019, more than 90% has fallen in value against the Lebanese pounds. The World Bank stated that “this did not occur” due to pre-crisis financial fundamentals, global conditions, and institutional environments.