 Marina Chamma In the aftermath of war or major conflict, a country’s economic priorities are usually straightforward, starting with reconstruction, reverting from the demands of a war economy back to regular economic activity in productive and growth sectors, to maintaining price and currency stability, all backed by well thought-out fiscal and monetary policies to support these objectives. However, where does a country like Lebanon begin to pick up the pieces of its economy following a 13-month long war, halted by a tenuous agreement and, which barely three years ago, was in the midst of one of the world’s most severe economic and financial crises since the 1850s An economy already in tatters
Two weeks before the ceasefire between Lebanon and Israel came into effect, the World Bank had estimated the war’s physical damages and economic losses at USD 8.5 billion – USD 3.4 billion in physical structures and USD 5.1 billion in economic losses. The backdrop to this was a Lebanese economy already in a downward spiral since October 2019. The country’s GDP fell from USD 55 billion in 2019 to USD 23 billion in 2023, inflation has recorded triple digits since 2020, and the trade deficit, having slightly improved during the COVID19 pandemic, was back to pre-2019 levels estimated at around USD 14 billion in 2023. Lebanon remains a country in default, whose foreign debt to GDP ratio was estimated at 390% in 2022, one of the highest in the world. Meanwhile, following the collapse of the national currency, the economy has effectively become dollarized (with minor exceptions), and the financial sector continues to be monopolized by “zombie banks” that refuse to take any responsibility for the crisis, keep passing the brunt of losses to depositors, and opt to rebrand instead of restructure. Another window of opportunity Unsurprisingly, economic activity has started to pick up in several sectors and regions since the ceasefire, based on the degree to which they were directly or indirectly affected by the war. For example, the tourism sector is expected to witness some activity to cover for some of its short-term losses, while activity in the commercial and agricultural sectors in the most affected areas will take longer to be restored. The fact that there are – and have always been – pockets of prosperity in the economy, does not attest to the now refuted, yet still used and abused, notion of economic and financial resilience. The Lebanese are doing something right, individually or by sector, but not right enough. Such resilience has proven time and again that it does nothing but “undermine public institutions of the state,” and is counterproductive to the establishment of a genuine unified national economy, that would allow for growth and prosperity on a national level. As in the aftermath of previous wars and major crisis, Lebanon’s most recent war with Israel has led to calls to take advantage of this “window of opportunity” to overhaul and implement long-overdue reforms. Politically, the call is towards strengthening the Lebanese Armed Forces as a way to rebuild and reinforce the state and its institutions. The situation shouldn’t be any different on the economic front. Lebanon has lost each and every window of opportunity presented to rebuild, reform, and set the foundations for a healthy, diverse, and socially just economy on solid grounds for the past 35 years…but shouldn’t do so yet again. Economic priorities Economic prosperity and stability cannot be guaranteed without political stability, security, and more importantly, the political will to adopt and implement policies for growth and equal opportunities for all. Neither should the economy rely on external assistance and so-called donor conferences (e.g. the 2006 “Shukran Qatar” campaign and the Paris conferences) to sustain itself, though successive Lebanese governments have almost taken this assistance for granted and at times made it a cornerstone of the country’s economic policy. Therefore, there is no substitute for developing a comprehensive economic strategy, with timely plans to be adopted over a specified timeline, aimed at reducing poverty and establishing a sustainable, equitable and inclusive economy, along the following lines:
Otherwise… What has gotten the Lebanese economy this far – along with a semblance of stability – is nothing but a keen sense of survival, which can only take a country so far for so long. The listed reforms are but the most basic and essential needed, a list that has been reiterated for decades, falling onto the deaf ears of those who benefited from the status quo, while further marginalizing those who didn’t. Nothing short of these reforms will be needed to reconstitute a solid national economy, rather than an economy of selective and transitory pockets of prosperity. Nothing short of these reforms will ensure that Lebanon doesn’t keep on failing to reach its enormous potential and the prosperous living it could provide to all its citizens. Otherwise, Lebanon will remain as an economy of illusory prosperity, scrambling to make the most of, and save as much from, short-term gains, in the midst of growing inequality, until the next storm hits. About the Author Marina Chamma is a Political Economist and IFI's Communications Manager. Comments are closed.
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