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21/02/2020
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LEBANON: Severe inequality and an economy near collapse

Protests have been sweeping the Middle East and North Africa this last year. In Lebanon they are largely about corruption, austerity and financial instability, which has its roots in a neighbouring civil war and a drop in foreign investment and remittances from the Lebanese diaspora. Since Donald Trump became US president, tougher sanctions against Lebanese banks accused of links to Hizbullah have weighed on the economy, where banking is central.

Behind Lebanon’s protests

Massive protests in BeirutMassive protests in Beirut Paris, Jan.6.– Lebanon's telecommunications minister Mohammad Choucair decided on 17 October 2019 to introduce a tax of $2 a month — the ‘WhatsApp tax’ — on all free apps for mobile phones. That evening hundreds of young people, many among Lebanon’s poorest, demonstrated in major cities.

The next day they blocked the main roads and held sit-ins in symbolic spots such as Beirut’s Martyrs’ Square. The government shut down its offices, universities and state schools, paradoxically encouraging even more to take to the streets. The closure of Lebanon’s banks for two weeks from the start of the protests fuelled the anger, as depositors were denied access to their money.

Two months on, the protests were still happening. The demonstrators continued to demand an end to the regime based on power sharing between the Shia, Sunni and Christian communities. Prime Minister Saad Hariri resigned on 30 October, and on 19 December President Michel Aoun asked former education minister Hassan Diab (2011-14) to form a government of technocrats. The demonstrators were far from unanimous in approving this appointment.

On the brink of bankruptcy

Lebanon’s economy is near collapse and there is severe inequality: the richest 1% own 40% of national wealth and take home 23% of national income, according to a report by the World Inequality Lab. The country is also on the brink of bankruptcy with a public debt burden equivalent to 150% and a budget deficit equivalent to 11% of GDP. The cost of servicing its debt (interest expenses and principal repayments) is nearly $4bn a year.
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