Painful Possibilities… How Lebanon will Look 6 Months from Now!

الثورة اللبنانية

The economic and financial crises in Lebanon are worsening as the national currency collapses and paralysis is overtaking all economic sectors. In parallel to the bleak scenes that are surrounding all Lebanese citizens during these times, there is another taking place in the Palace. The Lebanese Prime Minister seems to be overcome with suspicions of conspiracy, as he battles windmills to protect his own government from the backlash of what is to come. Diab does not see any solutions out of this predicament, except by pumping fresh dollars into the markets to curb the free fall of the Lira.

Read more: …The Pillaging Continues!

Antoine Farah wrote in AlJoumhouriya Newspaper that this approach in dealing with an eminent disaster of this magnitude, of which very little has transpired so far, has become an additional factor boosting pessimism towards finding the difficult solutions. The ordeal is as follows; there are only 2 emergencies that the government is addressing to salvage the country:

Stopping the free fall of the value of the Lira.

Writing off the 241 Trillion Lebanese Pound losses.

The two pointes mentioned above are not crises, but merely a result. If the government is serious in tackling these issues, they must address their causes and not their symptoms. Instead, they are misleading the nation by burning through all remaining dollars by funneling them into the black market for individuals to make quick profits and smugglers to funnel dollars into Syria. This attempt directs precious hard currency reserves into channels outside the productive economy.

Unlike wasting millions of dollars in the chaotic black market, proceeding with electricity production contracts will better prevent the collapse of the Lira.

If this government does not immediately begin to address the causes of the crises, Lebanon will face, in the next 6 months, a catastrophe of epic proportions; of which the possibilities could happen as follows:

First: The amount of dollar reserves owned by Lebanese banks with their correspondent banks abroad has decreased from 6 to 4 billion dollars according to unofficial estimates. This number is expected to drop back to around 2 billion by the end of the year 2020. Notably, some banks have already run out of foreign currency while others will run out in the next 6 months. This means that commercial banks will no longer be able to meet depositor’s withdrawal demands that may be stipulated, should a capital control law be issued.

Second: The central bank “Banque du Liban” reserves will in turn decline to about $15bn due to the continued subsidies of fuel, wheat, medicine, and raw material. Ironically, the Minister of Economy who demanded the lifting of these subsidies, simultaneously released a subsidies list that includes around 200 consumer goods. If this bill is passed, the central bank reserves could deplete at an even faster pace. This bill seems to be a settlement against the alternative proposed by Hassan Diab who called for pouring more cash into the black market.

Third: The exchange rate cannot be predicted by one without being accused of a crime. However, it is certain that the rate would be high enough to deprive the majority of Lebanese of foreign currency and leaves them destitute.

Fourth: The occurrence of security disturbances due to the massive decline in economic living conditions. The reduction in the value of public service salaries, including that of the army, is going to leave many unable to maintain a livable income. Unemployment will prevail and scenes of humiliation and despair will be common, and depression, which is an indicator of dangerous times to come, will become rampant.

Fifth: Hospital performance will drop significantly as the costs can no longer be afforded by the national currency. Private and decent hospitalization will only be available for the upper class.

These are some of the expected scenarios. Some are assured and unavoidable, some can me changed positively or negatively depending on the efficiency of government plans or the availability of foreign aid from the IMF. However, if the government’s plan is summed up by the speech of its Prime Minister on June 25th, who said that “The country is going through a major crisis and the results are not promising, and only the central bank is responsible for the dollar exchange rate. If the bank is unable to stabilize it, they must reconcile with the government.” If this remains the prevailing mentality, the fall will be hard. Very hard.

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