Lebanon: World’s 3rd Indebted Nation Portends an Economic Collapse
The Lebanese economy is highly indebted over the past two decades as the government is burdening heavy public debt. This has hindered economic growth and situated Lebanon among nations with the highest debt to GDP ratios in the world, according to the CIA World Factbook.
Historically, according to “the Newyork Times”, Lebanon is known for paying its bills by increasing amounts of debt. However, this accentuates its weakness in reformation and boosting its economy.
Many factors helped in increasing the economic crisis, mainly during the October 17th revolution, coronavirus pandemic, and lockdown of the country. For instance, half a million children in Beirut are struggling because of survival or hunger, as stated in a new analysis by Save the Children.
According to the International Monetary Fund estimates, public debt in Lebanon has increased to reach more than 155% of GDP in 2019 and is expected to reach 161.8% of GDP in 2020 and 167% of GDP in 2021. Also, in a report on BBC news, interest payments consume almost half of government revenues, crippling public finances, which added higher interest rates to the budget deficit.
Nevertheless, the current economic situation in Lebanon is highly due to government corruption and financial mismanagement. According to transparency international, Lebanon ranked 137th out of 180 countries on Transparency International’s 2019 Corruption Perceptions Index. Moreover, as stated by WorldBank, Lebanon is in the heart of financial, social, and economic hardship situations which could get worse.
In addition to macroeconomic and political challenges, the country is facing many social issues as well. The Lebanese economy has been mostly unfree for eight years in a row in a 2020 report for Index of Economic Freedom.
Overall, Lebanon urgently needs a reliable crisis management strategy to survive any possible economic collapse. This requires crisis equilibrium and recovery identification, taking into account several aspects mainly the external, fiscal, and financial sectors, a growth framework, and governance deficiency.
