An Economic Explosion: Economic Crisis of Lebanon

“Lebanon is no longer on the brink of collapse. The economy of Lebanon has collapsed,”

- Fawaz Gerges, Professor at the London School of Economics.

The catastrophic Beirut explosion that took place on August 4th, 2020, has not only been the cause of widespread deaths but has also left millions of Lebanese infuriated, re-igniting the anti-government protests in Lebanon. The blast that killed at least 220 people and injured many more, was caused by 2,700 tonnes of ammonium nitrate that was left unattended for almost 6 years at the city port due to some serious economic woes and negligence by officials. The blast has exacerbated the sufferings of the people of Lebanon, and they are now simultaneously witnessing health, financial, economic, and political crisis.


The economy of Lebanon has been subjected to a series of wars and conflicts in the past, the most prominent and recent ones being the 2006 Israel-Hezbollah war and the Syrian civil war, which severely damaged and crumpled its economy.

Nevertheless, over time, the government was instrumental in rebuilding its infrastructure and constructing a robust post-war economy. The Lebanese banking system adopted stringent and conservative policies to ensure financial and economic stability. The path of reconstruction was, however, not easy. The government had to undertake huge costs and loans to reconstruct the economy, because of which Lebanon is the third-highest indebted country in the world today. The public debt has strained the finances of the government and more than half of the government’s revenue is spent on interest payments. Public sector wage increase in 2017 coupled with an increase in other expenditures has further aggravated the financial burden.


A series of political protests have taken place in Lebanon that have been a result of years of mismanagement and corruption by the government. In 2019, the government rolled out a set of new policies and tax measures with the main aim of drumming more revenue.

Under the 2020 budget, the Lebanese government announced its plans to impose new taxes on a series of items from tobacco and gas to social media platforms like WhatsApp, triggering wide-scale protests and massive public backlash. The people of Lebanon were living under horrible living conditions with frequent power cuts, lack of safe drinking water, and food shortage. The protestors demanded better quality of basic services such as health care, transportation, and infrastructure. What further provoked the protests was the shortage of foreign currency which led to the Lebanese pound losing its value against the dollar in the newly emerged black market. As a result, thousands of people took to the streets, forcing the then Prime Minister Saad Hariri and his government to resign.


Since October 2019, the Lebanese pound has been depreciating significantly, losing over 86% of its value. Right now, the inflation rate in Lebanese is the 3rd highest in the world.

Lebanon relies on imports from other countries for almost all their needs from tubes and pipes to coffee and cars. The inexorable inflation has forced the prices of fuel, medicine, and food to rise rampantly, thereby depriving the people of Lebanon of these basic necessities.

With prices increasing on average by more than 56%, the purchasing power of the country is said to have a disastrous effect. With the drop in the value of the currency, people saw their income and savings lose over 60% of their value in weeks. Unemployment has soared significantly, and more than half of its population is feared to slip into poverty.

Blackouts are spreading throughout the country and most people don’t have access to electricity for more than 2-3 hours a day. The economic crises have decimated business and plunged numerous families into destitution. Protests broke out again in 2020 after the Beirut explosion forcing the government to take responsibility and controlling the situation in the country. Following which the government resigned.


To curb the spread of the coronavirus pandemic, the October 2019 protests were put to a halt in March. However, the lockdown further exacerbated the economic and political struggles of people in Lebanon. Inadequate social welfare measures and lack of government aid led to more and more poverty. The health care facilities were already underfunded and the explosion further strained the health care sector of the county leading to a rampant shortage of medical equipment.

Government officials often resorted to malpractices and illegal financial incentives to earn more money. Lack of government responsibility and mismanagement, coupled with the COVID 19 and the Beirut blast has contributed to the economic downturn of the country. Considering the fact that Lebanon is already highly in debt, hopes for rescue are fading.

Talks with the International Monetary fund to secure a $10 billion loan have hit a dead end there is no sign of recovery or help. The people of Lebanon demand an end to government corruption, fair tax and financial procedures, an end to the sectarian political system, and a more accountable government.

By Smriti Vohra

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