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No sight of a solution to the five-year-old Lebanese economic crisis

No sight of a solution to the five-year-old Lebanese economic crisis

Five years have passed since the break-out of Lebanon’s dramatic economic crisis and the issue has persisted with no solution in sight.

The value of the Lebanese pound vis a vis the US dollar has steadied at around 100,000 per one dollar, amid chaotic soar of prices of commodities, necessities and services, with very low payments, particularly for those who serve in the public sector.

The crisis, embodied particularly with the pound’s virtual loss of value, has various dimensions, amid a lack of reforms in the administration and the key sectors, failure to elect a new president and keeping the country under the administration of a caretaker government as well as a paralyzed parliament.

Perhaps, the sole sectors that have demonstrated some health manifestations are the private business sector and tourism, with a very narrow margin., Last year’s tourism season drew some hard currency cash to the economy.

However, this season’s success is largely controversial, although many Lebanese living in the diaspora c
ame to Beirut despite the echoes of war in southern Lebanon. As to non-Lebanese tourists, several countries, namely GCC states had advised citizens to avoid traveling to Lebanon and some, such as Kuwait, evacuated citizens.

The World Bank predicted in a report a 0.5 percent economic growth in Lebanon in 2024, compared to a recession at 0.2 percent in 2023 and 0.6 percent in 2022.

According to the forecasts, the gross domestic product per capita grew from 1.2 percent in 2022 to 2.4 percent in 2023 and 3.1 percent this year. Moreover, the WB report expected the current account to stay at the level of 10.8 percent of the GDP, compared to 11 percent in 2023 and 32.7 percent in 2022.

Furthermore, the public budget is forecast to record balance in 2024, against backdrop of a 0.5 percent surplus in the GDP in 2023 and a 2.9 percent deficit in 2022.

Regarding the economic conditions in the first six months of 2023, the economic and financial researcher Dr. Mahmoud Jebaee told the NNA that despite the ongoing war
in southern Lebanon, there have been some positive indications related to the balance of payments, the account of the current balance and the investment portfolio that have grown by USD 3.5 billion.

He forecasted a surplus in the balance of payments, as happened in 2023, where it would amount to USD two billion, due to the inflow of funds from the immigrants, tourism and seasonal Lebanese visitors.

Dr. Jebaee acknowledged that the war in the south negatively affected sectors such as commerce, agriculture and services, but he opined that the private sector in general “coped with the crisis” as a result of support from economic authorities.

The state expenditures are higher than the income, he affirmed, alluding to one of the basic issues, also stressing on the need for reforms, combating illegal custom transactions, and tackling tax evasion.

The USD 22 billion domestic product can be increased if the state tackles the imbalances.

In contrast to some optimism Dr. Jebaee manifested, he acknowledged that the
wasting of USD 70 billion worth of bank deposits remained the largest and most injurious thorn.

The huge funds had been borrowed and spent by the state from the banking sector for many years until the financial resources dried up, with clients finding their life savings vanishing in thin air.

“We will not be able to find a solution to the depositors’ crisis as long as we witness failure to shoulder responsibilities and absence of law to regulate means of paying back the afflicted depositors,” he said, opining that the problem can be addressed with aid from the central bank and the banking sector — a notion other experts may view as controversial.

As to the remedies, he called for treating “the tumor of employment in the public sector,” restructuring the public sector and re-training the civil servants. He noted in this respect that privatization is required to slash spending, hike proceeds and stem erratic expenditures.

He expressed concerns that this year might end without witnessing reform laws “that c
onstitute the sole avenue to get out of the crisis.” On the performance of the acting governor of the central bank, Wassim Mansouri, he lauded his “rational policies” and success in increasing the central bank’s assets and keeping the currency rate stable. Mansouri had succeeded Riad Salameh, whose mandate was marked with the break-out of the financial crisis.

Source: Kuwait News Agency