Lebanon has been facing a financial crisis for the past few years now, but many outsiders looking in may ask themselves, why? The country’s economic troubles stem from its political instability, which has resulted in many banks being unable to recover from the recent recession. The COVID-19 pandemic and the Grain Silo explosion which put the government in a bad eye certainly have not helped. In this article, we’ll explore the timeline of Lebanon’s current economic decline.

Ruins After Beirut Port Explosion | Source: AS

Whats Behind The Financial Crisis?

A financial crisis is a situation in which the state of a nation’s or region’s economy is very weak. It can be caused by events such as a decrease in exports, problems with foreign investment, and reduced consumer spending. Financial crisis can have several causes. A decrease in exports is caused if there is an economic slowdown in another country that buys your products. Problems with foreign investment can be caused if many banks stop lending money to businesses because they are not sure about their creditworthiness and so cannot borrow more easily than before (they might also need more cash than usual). Reduced consumer spending happens because people aren’t earning enough money to spend as much on goods and services as before; this may also happen if prices rise too much due to inflation.

Lebanon Flag With COVID Pandemic Symbolism | Source: AS

In Lebanon, the banking sector is highly concentrated with a handful of banks controlling the majority of total banking sector deposits. The banking system has been affected by the war in Syria and the political crisis in Lebanon. In the recent years we have also seen a new and alarming trend. It’s people holding banks hostage to be able to withdraw their own currency. That is how hard the banking sector has been hit.

Lebanon Bank Robber Who Many Saw As Hero | Source: Times of Israel

The crisis that has engulfed Lebanon is more than just the sum of bad economic decisions. It is also the result of political and social instability, which has prevented any kind of development or progress in the country. The only way to solve this problem is by finding long-term solutions that can benefit everyone involved to prevent future crises from occurring again.

Lebanese Lira Comparison To USD | Source: AS

Lebanon Banknotes During The Crisis

The Lebanese Pound has been devalued and in the country black market exchange rates have also popped up. In the black market people offer around 30X the amount of Lebanese Pounds in exchange for dollars since the USD is a safe currency. The Central Bank set its rate 1 USD to 1,500 Lira. The market sets it at 45,000 Lira to 1 USD. Similar types of exchange rates are being offered in Argentina with the “Blue Dollar”. Although the Lebanese Pound is very popular among collectors what do you think is the fate of the country?

Lebanon 100,000 Livres | 2017 | Source: Banknote World

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