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Lebanon Crisis

Lebanon’s crisis has been one of the severe and unique crises that have been seen in history. Today, Lebanon is not only suffering from one of the worst economic crisis globally but also is experiencing the health crisis, the garbage crisis, and witnessing rampant unemployment in their country. So what is the reason behind such a devastating situation? Is it their political system that is at fault? Let’s discover it.

There are multiple reasons behind the crisis that has been experienced by the people of Lebanon but the political system of the country has played a major role directly or indirectly. So, we need to first focus on the political system of the country and how it works? Lebanon is a country attached to the Syria border and has an attractive religious demographic. Around 27% of people are Shia Muslims, 27% Sunni Muslims, 21% Maronite Christians, and the rest 25% are other small communities. Therefore, in total, around 18 communities make up the whole country. Interestingly, when in 1943 the country got independence from French colonizers, the government decided that they would provide equal representation to every religious community. So, they focused not only on providing equal opportunity to each community but also on equal representation. Following that, they ruled that their Prime Minister would always be a Sunni Muslim, their president would be a Maronite Christian, and parliament speaker would always be a Shia Muslim. The idea may seem to be perfect theoretically, but in reality, nothing of that sort happened. In reality, every religious community made its party, and that party worked for the welfare of only that community which led to increasing conflict between these religious parties. From 1975-1990 there was a civil war in the country and after which a second republic was established in Lebanon, which decreased the power of Maronite Christians (President) so that equal representation could be given to Christians and Muslims in the parliament. It would seem that things are back on track after the 1990s, but the answer is NO. The country could not function appropriately since religion was so much involved in the politics that only people of one religious community voted for the party representing their community. This led to the weakening of the internal system and provided an open gate to external forces (Foreign Countries) to exploit the current situation. Iran(Shia Muslim) and Saudi Arabia(Sunni Muslim) started increasing their influence on Lebanon. They started externally supporting different parties, and the same happened with Maronite Christians as well, and there was an excessive external influence over the country. Different political parties were not willing to work with each other, as a result of which they were involved in bribery and were negotiating amongst themselves about the various decisions to be taken, which led to an increase in corruption in the country. The conditions are so terrible that Lebanon ranks fifth in the world’s worst Debt to GDP ratio of around 150%. The youth unemployment rate is approximately 37%, and the overall unemployment rate is about 25%

Economic Crisis 2019

More than one-third of the population is below the poverty line, and after the civil war, the infrastructure was never rebuilt due to the lack of funds with the government. Lebanon politicians were busy filling their pockets and sugar coating the things in front of the public using religion as a medium which made the government completely hollow. There were no funds left at their disposal. Due to significant debt commitments, the government increased the taxes on the public. On 17th October 2019, the government, out of the blue, passed a new rule that taxes would also be imposed on WhatsApp calls of $6 per month. Now the water was filled up to the brim, and it was the tipping point where people were annoyed, and they were no longer ready to cooperate with the government, and this marked the beginning of the October revolution in 2019. Although the government took back its decision on WhatsApp calls, this event has already triggered the revolution, and now protests have started, and thousands of people have come to the streets. After these protests, their prime minister resigned, and Mr.Hassan Diab was elected as the new prime minister. He urged immediate economic reforms to get everything back on track. But his appointment came at a very bad time as shortly after the world witnessed the Covid 19 pandemic, and the economy was very badly hit, which again worsened the system.

Recent Blasts

Of course, if all these reasons were not sufficient for the downfall of Lebanon, a “natural disaster” was more than enough to take the whole country many years back. Even if the government was making some efforts for a revival, all these efforts were shunned down by the traumatic day of 4 August 2020. At around 3 pm (UTC), the whole world was left shocked. The blasts were happening in Beirut, but the noise was being heard around the world. The city, along with its neighbors, could not process what had happened. So what actually happened? Some highly inflammable substances were stored hastily on the Beirut Port by the Lebanese Authorities. Was the lack of safe storage of the material to be blamed for the cause of the blast is still not clear. Some try to shift it to the government, while some believe that it was nature’s wake-up call. Still, there are various claims to this disaster. The Lebanese government couldn’t manage the crisis because they were themselves involved in an economic tussle. So following the disaster, they declared a two-week emergency to seek out the issue. However, this did not go down well with the civilians. They raised questions about their welfare and started protests against the bad management of the authorities, and subsequently, this protest merged with the movement that has been continuing since 2019. The ammonium nitrate stored in the warehouse caught fire, and within 40-45 seconds, a small ignition led to one of the most powerful artificial non-nuclear explosions in history. Although there is still a discrepancy in what the number of casualties actually were but according to government sources, around 218 people were feared dead, and the number of injured persons was around 7000. Not only this, because of this 30-45 second act, around 300,000 people were left on the streets without any compensation. This was just the direct effect of the blasts. Talking about the indirect effects, the grain silos around the port area were destroyed, leaving the country with less than a month of grain reserves, leading to acute food shortage in the country against the backdrop of the ongoing economic crisis and the COVID 19 pandemic. The severity of this blast was so much that the country’s largest medical facility was destroyed, and the patients had to be tended to on the streets. From the financial point of view, the losses because of this explosion were around $15 billion, but the insured loss was only $3 billion. The list of damaged properties included not only hospitals and homes but also tourist hotspots, hotels, schools, and there is no stopping the additions in this list. The failure to remove the materials from the warehouse and relocate them was attributed to mismanagement of the port, corruption of the government, and inaction of the flag registry’s country and shipowner. The effects of this explosion will not be restricted to the shorter term, but these will last for a long time. Not only will the mental trauma affect the people, but the financial and economic crisis will be a terrible setback against the already deteriorating economy. The country’s port had suffered some irreparable damages, which were the country’s main entry point for imported goods-covering 80 percent of Lebanon’s maritime shipping traffic. Inflation in food prices caused by the destruction of silos coupled with the displacement of people and depreciation of the national currency, the purchasing power of the households was bound to fall. The already deteriorating social-economic crisis along with the recent blasts was expected to cause the increase in the number of poor and extreme poor in the country, which is already at a high of 45%, according to a World Bank report. Looking at the poverty estimates, the deteriorating macroeconomic situation, spiraling inflation, and reduced capability of households to stockpile, the World Food Programme (WFP) estimated that immediate cash assistance is needed for at least half of the people who were directly affected by the explosion for shelter, food, and other basic needs. It also said that half of Lebanon’s population of 6.7 million people and the entire Syrian refugee population of 1.5 million live in deep poverty and are short of food. According to an estimate, WFP required $100 million to provide food and essential assistance in Lebanon until the end of 2021. Inflation has shot up more than 110% in the country. The unemployment rate soared to 40%. Crime is up, and protests are the new normal. The blast has acted as a cherry on top of the already suffering Lebanon political and economic crisis. To conclude, the political scenario and the financial scenario of the country are already in ruins, and it is expected to worsen further. On the political front, the country has not yet received a fully functioning government in almost a year. After the resignation of the then prime minister Hassan Diab, amid the public outrage due to the blasts, no other candidate has taken the responsibility of handling the country, leaving the public on-street homeless, distressed and helpless. Three leaders were appointed as Prime Minister-designates since the blast, and two of them stepped down. In September 2020, Prime Minister-designate Mustapha Adib abandoned his weeks-long efforts to form a government as he failed to reach a consensus with the major political blocs. In October 2020, former Prime Minister Saad Hariri was appointed by the President as the new Prime Minister-designate. Nine months later, Mr. Hariri stepped down without a Cabinet. Mr. Hariri said he failed to reach an agreement on portfolio allocation with President Michel Aoun. Mr. Aoun later released a statement on Twitter, saying Mr. Hariri was not ready to discuss amendments to his proposals. After Mr. Hariri’s failure, billionaire businessman and former Prime Minister Najib Mikati were tasked with forming the next government. On the economic front, though, the country has been able to muster international support and have raised some funds that will be used in its rebuilding, but these measures are far from satisfactory. It is believed that the crisis in Lebanon is worse than the 2008 Greece financial crisis or the 2001 meltdown in Argentina. What can be inferred is that the economic hazards of the country are the result of the political instability that has been haunting the country for  a long time. Earlier, the country was just managing with this ill-placed system, but a series of ill-timed misfortunes have highlighted the plight of this country. The COVID-19 pandemic at the beginning of 2020, along with the Beirut explosion in August, has shaken the country to the extent that it will take around 12 to 19 years to rebuild itself financially. Was it the unprecedented disasters that shook this country’s economy, or was it the hidden political mismanagement that led to this plight? It can only be explained by several people using several theories in times to come.

By Trish Gupta & Mudit Jain

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