Situational Report: The financial and Economic Crisis Enveloping Lebanon

Poverty is becoming more widespread due to the impact of the current political and economic crises and the lack of any development plans in a country where debt has reached 73 billion US dollars. The political situation reflected on the Lebanese economy and lead to discouraging internal and external investments, as well as closing a number of institutions which resulted in preventing job creation and increasing unemployment rates.

1.5 out of 4 million Lebanese nationals, 178,200 Palestinian refugees residing in Lebanon, and 720,000 Syrian refugees registered with UNHCR are below the poverty line. Today, over a million Syrian refugees and half a million Palestinian refugees reside in Lebanon, according to the United Nation’s “Priority Needs” study about the issue of poverty in Lebanon.

The study revealed an increase in the number of poor people in Lebanon by 61% since 2011 and until 2019 while 28.55% of the Lebanese population lives on less than $4 per day. In Beirut and the majority of Mount Lebanon area, the percentage of those living below the poverty line is 15% and raises up to 60% in the outskirts, mainly North in Akkar and Denniyeh, South in Marjiyoun and Hasbayah, Bekaa in Baalbeck and Hermel and within cities like Tripoli and Saida.

International reports mention unemployment rates that exceed 20% among youth, and due to the disparity in official statistics, the number of the unemployed in itself has become a dilemma that needs to be solved. According to a report on the number of unemployed people that aimed at finding out why young people are being radicalized and subjected to social diseases, 36% of Lebanese youth are unemployed.

According to this study, about 660,000 individuals were unemployed in Lebanon. The unemployment rate varies from region to region wherein Beirut governorate it reaches 19.9%, while it is 32% in Mount Lebanon, between 20% and 21% in Saida, 19% in Tyre, 44% in Akkar, between 22% and 23% in West Bekaa, and between 44% and 45% in North Bekaa.

It can be said that such red indicators in the Lebanese economy were caused by the size of corruption that plagues the Lebanese government institutions; where the country ranked 143^rd out of 180 countries in the 2017 corruption classification by Transparency International.

In conclusion, it can be said that the phenomenon of poverty in Lebanon is linked to many economic, social, political and sectarian variables and does not lie solely on one of them, so when the country decides to face poverty, it must first work on a genuine and effective social safety net, in addition to promoting equality between the governorates and setting a serious program to fight corruption at all levels.

The cries of concern of employees in Lebanon rise day by day as a result of the measures taken by a large number of companies since the beginning of protests last month, including arbitrary termination and salary cuts in the absence of any accurate statistics until this moment.

The series of employee terminations throughout all employment sectors led to collective employee terminations accompanied by a wave of salary cuts as companies closed and bankruptcy hit major institutions on which the most important sectors in Lebanon are based.

Some companies are calling their employees and requesting them to sign their resignations in return for financial compensations. Such a method has already succeeded in persuading and terminating a number of them, while others have sued by resorting to the Ministry of Labor.

At the other end of the spectrum, a number of other companies have reduced their employees’ salaries by about 20%, in line with the reduction of their working hours. Some other companies have circulated to their employees that the payroll cut will take effect starting 1-1-2020.

The price of the Lebanese pound against the US dollar in the black market continues its gradual rise, where the LBP/USD exchange rate varied between 2425 and 2525 LBP for each 1 USD.  The fluctuation in the dollar exchange rate is affecting the prices of consumer goods in the Lebanese markets, which have led to the rise in the prices of goods. As citizens who are saving hard currency rushed to exchange it and make major profits in the current situation, the Lebanese pound’s savers and employees whose salaries are pain in LBP found themselves aggrieved, first because they could not benefit from the currency difference, and secondly because of the rise in the prices of goods due to the rise in the dollar exchange rate; thus, resulting in the decline of their purchasing power.

Some financial and economic experts have made it clear that the impact of the rise in the dollar exchange rate on employees who are paid in Lebanese pound, who constitute a large segment that includes all public sector employees and most private-sector employees, is negative in terms of the decline in their purchasing power.

The economic downturn has led to a decline in demand and thus to a decline in prices. However, the rise in the dollar exchange rate affected the prices of imported goods and pushed them up.

The Lebanese citizens also spend 50% of their monthly salaries on benefits that are in Lebanese pounds, such as subsidized housing loans, taxes, fees and so on. This means that the rise in the dollar exchange rate affects 50% of the value of salaries and wages in Lebanese pound. Thus, with the exchange rate rising by about 33%, it is expected that the purchasing power of citizens who are paid in Lebanese pound will decrease by 15 to 18%.

Some luxury food items have begun to disappear from the shelves of large commercial markets and shops like some legumes, frozen agricultural materials and baby milk products. Concurrently with those pressures and the current protests, many complaints were circulated among citizens on social media about the rise of consumer goods prices, especially food items, which negatively impacted their purchasing power and consequently the consumption basket that reached a record within two months, as prices rose between 40 % and 100 %.

If economic pressures continue, Lebanon will face a food crisis, mainly that Lebanon lacks food security and depends on importing food products from abroad where it imports all sorts of wheat and legume, as well as meat, cattle, fruits, vegetables, and medicines all while paying for all these items with USD, which is already difficult to get in the current situation.