Economy News

Beirut Explosions Worsen Lebanon’s Economic Crisis

Beirut Explosions Worsen Lebanon’s Economic Crisis

The explosions that hit Lebanon’s capital, Beirut, on August 4, 2020, is also a massive blow to Lebanon’s dwindling economy. Two blasts in Beirut’s port area left at least 135 people dead and 5,000 injured, with more than 300,000 people displaced.

Blasts hit Beirut at a time when the country is already facing a severe economic crisis due to political corruption, failure of its banking system, high inflation, and the Covid-19 pandemic.

Reacting to the explosions, Tamara Alrifai, a spokesperson at the United Nations Relief and Works Agency for Palestine Refugees in the Near East, said that it would be hard for Beirut to rebuild amid ongoing economic, political and health crises.

Although European and Gulf countries offered financial aid to Lebanon, it is expected that the widespread corruption and mismanagement would not allow the aid to reach its destination.

Lebanon’s Abysmal Economy

Lebanon has a history of being run by leaders and officials who mismanaged the economy for decades, making it grim with every passing year.

The International Monetary Fund (IMF) forecast a decline of 12% in Lebanon’s economy in 2020; the nation’s worsening economic situation is only confirming the same. Added to this, Lebanon defaulted on some of its public debts in March 2020. Some other indicators of Lebanon’s falling economy include a Ponzi-like scheme, Moody’s decision to cut Lebanon’s credit rating, its banks running out of money in 2019, and increasing unemployment rate and poverty.

The explosions in Beirut will put extra pressure on the nation’s economy, said Lebanon’s Economy Minister Raoul Nehme. According to Nehme, the explosions have impacted everyone and everything in Beirut. The blasts have damaged the port, which accounted for 60% of the country’s imports and affected the tourism sector as well, he further added.

Although Lebanon was in talks with IMF to secure a $10 billion loan until July 2020, IMF looks in no mood to provide any potential financial relief considering corruption in Lebanese politics, the government’s mishandling of the nation’s economy and control of Hezbollah over the national politics.

Laura Bell, a Lebanon expert at West Texas A&M University, warns Lebanon of becoming a failed state if its leadership does not act on time, and international assistance is not offered at the earliest.

With explosions, a sinking economy, and the pandemic around, the popular uprising could lead to Lebanon’s political crisis.

About author

Margaret Gray holds master degree in journalism and currently working in FinanceBottom team as a news reporter covering news stories regarding finance, business and economy. She has also worked as a freelance journalist for almost 2 years.
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