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Inside Lebanon’s crippling economic crisis (www.nbcnews.com)


BEIRUT — Mohammad Kekhia stares into his nearly empty fridge. His 14-year-old son, Hassan, stands beside him, peering in hopefully.

To Hassan’s disappointment, his father closes the door without retrieving any food. There is not enough. Not if they want to have anything left for tomorrow.

“We are eating once every two days if we are lucky,” Kekhia says.

Lebanon is grappling with its most severe economic crisis in modern history. The lira has lost over 80 percent of its value since October. Unemployment is soaring. Prices are skyrocketing. Hunger is spreading across this tiny Mediterranean country, known worldwide for its cuisine.

Mohammad Kekhia stands in front of his fridge, which he is struggling to fill. He lives in a single room with his wife and three children. “We are eating once every two days if we are lucky,” he tells NBC.Finbar Anderson / for NBC News

The collapse of the Lebanese currency has had knock-on effects in neighboring Syria, which has long used Lebanon as a route around sanctions. And the crisis has left Lebanon, a strategic country regionally, open to intervention from other countries as a bailout from the International Monetary Fund grows more unlikely.

Relations have fractured further with the U.S, which is a backer of the army and some parties in Lebanon, as well as the largest donor to the IMF. Hezbollah — an Iranian proxy officially designated a terrorist organization by the U.S., and a political group with unrivaled influence in government — has claimed Lebanon’s crippling dollar shortage results from a U.S conspiracy.

Hezbollah leader Hassan Nasrallah is advocating for Lebanon to “look east” rather than west to get out its economic quagmire, setting its sights on investment from China.

Inside Lebanon, the issues involve not East or West but the daily struggle to get by.

In the northern city of Tripoli, Kekhia had been living a basic life with his wife and their three children. They have lived for the past seven years in a single room with a tin roof.

But now they’re battling hunger and deep poverty.

“Yesterday, our neighbors gave us a bag of bread. … We can’t even manage that ourselves,” said Kekhia, who used to work in construction. “Every two days, I go out and try to gather some olives or some labneh [thick yoghurt] so that the children can eat a little.”

Three months behind on rent, out of gas, stealing electricity from a neighbor to power their one lightbulb and the fridge, he and his family are desperate. They can no longer afford Hassan’s epilepsy medication.

Rouba Agha, 40, lives in the Tabbaneh neighborhood of Tripoli. “There’s a huge difference between the way we used to live and the way we live now,” she says.Finbar Anderson / for NBC News

The collapse of Lebanon’s economy has accelerated since anti-government protests began in October. With chants of “Revolution!,” hundreds of thousands took to the streets trying to bring down decades of corrupt leadership that relies on sectarian politics and entrenched patronage networks to enrich themselves, while creating stark inequality.

The impact of the coronavirus pandemic then shuttered businesses and left tens of thousands unemployed. In March, the government defaulted on $90 billion of debt, revealing the extent to which the entire post-civil war economic infrastructure was built on what critics call a “ponzi scheme”.

A long time coming

For years, the central bank had been borrowing from private banks to maintain a fixed exchange rate of 1,507 Lebanese lira to the U.S. dollar. This kept the prices of imports down. But the loans from the private banks were effectively coming from the deposits of ordinary Lebanese, who had been encouraged to deposit their money with promises of interest rates of up to 15 percent.

This costly 30-year artificial peg to the dollar brought the house of cards tumbling as over the years confidence waned, corruption grew, remittances from the diaspora shrank and backing from Saudi Arabia slowed.

Eventually, the government, the banks — and the people — ran out of money.

A young girl runs past the curtains that make up Mr. Kekhia’s front door. This neighborhood is poor even for Tripoli, where 45 percent of the population are estimated to live below the poverty line.Finbar Anderson / for NBC News

In just over a month, the currency has lost 60 percent of its value. Kekhia hasn’t found any work in eight months.

He used to earn between 25,000 ($16.50) and 50,000 lira ($33.17) per day. Today, that would be worth only between $2.70 and $5.55.

Food inflation has hit almost 200 percent. The prices of many items in the supermarket have tripled.

“We used to eat with this money,” Kekhia said. “Now there’s no food. No work. No medication.”

Today, with the price of a kilo (2.2 pounds) of meat at the equivalent of $33, even the army no longer gives it to soldiers.

The wealth disparity was pronounced before the crisis. Sports cars zipped around Beirut in areas packed with tourists.

At the same time, the World Bank was estimating that every other person in Lebanon’s 6 million population would live below the poverty line by the end of this year. Food security experts now estimate three-quarters of the population will be on food handouts by the end of the year.

Salaries are worthless and decades of savings have disappeared. Middle-income earners, who make up the bulk of the population, have become poor.

Facebook is flooded with people trying to barter clothes, furniture and other items so that they can get baby formula, cooking oil and other basics.

“My whole life has been my work and my house, sacrificing for my kids. I used to dream of giving them a good future, but that dream is dead now,” 42-year-old Mohammad Ghannoum said as he picked up a box of food from a charity in Beirut.

Ghannoum has toiled in a stainless steel fridge factory in Beirut since 1991, working his way up to management.

“My life before was excellent, but now it feels as though it’s going in reverse. It’s as though I went to bed with my income at $1,200 a month and I woke up with it being worth about $100-150,” he said.

Like many here, he has gone from living comfortably to receiving food aid. His life savings have disappeared.

“My son is supposed to go to university next year,” he said. “I saved up for years and had the money set aside specifically for that. I don’t even dream of being able to send him now.”

Opportunities for Lebanon’s youth were already scarce. Last year, the unemployment rate stood at 11.4 percent. Last week, the labor minister, Lamia Yammine Douaihy, announced the unemployment rate had risen beyond 30 percent.

No end in sight

Foreign intervention is unlikely without government reform. With traditional donors such as Iran, the United States, the United Kingdom and Persian Gulf nations both hesitant to push money into a corrupt system and also dealing with their own economic problems, Lebanon set its hopes on an International Monetary Fund bailout.

But after weeks of discussions, there is no agreement in sight to even begin the negotiations.

The U.S, the largest donor to the IMF, wants any bailout to come on the condition that there is a diminution of Hezbollah’s power.

The U.S is also the largest donor to the Lebanese army, making for a delicate balancing act.

“We are supportive of Lebanon as long as they get the reforms right and they are not a proxy state for Iran,” Secretary of State Mike Pompeo said last week.

In an unusual move, Hezbollah leader Hassan Nasrallah said last week that Hezbollah would be open to receiving help from the U.S. despite calling it “an enemy” of Lebanon.

One of Mr Kekhia’s neighbors walks between cinderblock shacks carrying a loaf of bread. Last week the Lebanese government raised the price of a 900 gram loaf for the first time in eight years.Finbar Anderson / for NBC News

Pompeo’s remarks followed Nasrallah’s comments that Lebanon had an opportunity to buy fuel from “a friend called Iran in exchange for Lebanese pounds.”

The secretary of state dismissed the claims as “unacceptable”, adding that the U.S. will do everything necessary to stop Iran from sending crude oil anywhere.

There is little optimism for the future of the IMF talks, which have not even agreed on the balance of losses, let alone the negotiations and have now been stalled.

“The government refuses to implement any reform, any prerequisite the IMF had for even continuing the talks,” said Jad Chaaban, an economist at the American University of Beirut.

While the political elite argues without much consensus, the refusal to reform is crushing the Lebanese people.

The national electricity company no longer has the U.S. dollars needed to buy fuel oil. Power cuts across the country have increased to up to 20 hours per day.

A couple watch their children play on the corniche at Tripoli’s sister city of al-Mina. Mrs Agha says she can no longer afford to take her children on trips to the seaside due to the worsening financial situation.Finbar Anderson / for NBC News

The country’s sectarian divides, which tore the country apart in the civil war, are resurfacing with fears that the continuation of the economic collapse could stoke violence again.

“The IMF negotiations will probably be canceled,” Chaaban said.

“Either we’ll have a locally brokered solution, which seems highly unlikely, or we’ll have a complete explosion [if Lebanon stays on this route] in which we’ll see social unrest and violence,” he said.

“We’re on the road to collapse.”

Additional reporting by Christina Cavalcanti.

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