Lebanon is grappling with one of the worst financial collapses the world has ever seen after successive governments piled up debt with little to show for their spending binge.
Fuelled by massive debt and the unsustainable way it was financed, the crisis has slashed Lebanon’s gross domestic product (GDP) by 58.1% since 2019, plummeting to an estimated $21.8bn in 2021, according to World Bank.
Already one of the most unequal countries, millions more have been pushed into poverty.
The World Bank expects those below the poverty line to have risen by as much as 28 percentage points by the end of 2021, after an increase of 13 percentage points in 2020. Government revenues collapsed by almost half in 2021 to reach 6.6% of GDP: the lowest ratio globally after Somalia and Yemen.
After a rapid economic contraction, government debt by some estimates was 495% of the GDP in 2021 — far more than levels that crippled some European states a decade ago.
Real GDP is estimated to have declined by 10.5% last year, according to the World Bank, while gross debt is estimated to have reached 183% of GDP, a ratio only exceeded by Japan, Sudan and Greece.
The World Bank said the nation’s elite were still misusing their position despite Lebanon suffering possibly one of the three biggest financial crashes globally since the 1850s.
The country is suffering a “deliberate depression” orchestrated by the Middle East nation’s elites, according to the global lender.
Compounding problems, an explosion in August 2020 at Beirut port killed 215 people and caused billions of dollars of damage.
A key focus in the enduring crisis has been the crumbling banking sector.
Before the onset in 2019 of a financial collapse, the small Mediterranean country had an oversized but prosperous banking sector.
But more than two years into the crisis, the reputation of Lebanese lenders has been shredded.
More than 160 branches have closed since the end of 2018, according to the Association of Banks in Lebanon (ABL).
The Lebanese pound, officially pegged at 1,507 to the greenback since 1997, has lost more than 90% of its value on the black market.
The dizzying currency collapse, coupled with banks imposing strict withdrawal limits and prohibiting transfers abroad, has left ordinary depositors watching on helplessly as their savings evaporate.
And yet bankers stand accused of bypassing those exact same capital controls, stoking the crisis by helping the elite squirrel billions of dollars overseas.
In December, the government set financial sector losses at around $69bn in a crucial step towards advancing IMF talks.
Lebanese officials began talks with the International Monetary Fund last month to pull the country out of the worst economic crisis in its history.
But IMF managing director Kristalina Georgieva has said the fund would only support a “comprehensive programme” for Lebanon that would tackle all the country’s ills, including corruption.
Lebanon’s financial collapse since 2019 is a story of how a vision for rebuilding a nation once known as the Switzerland of the Middle East was derailed by mismanagement as a sectarian elite borrowed with few restraints.