Four Reforms to Save the Lebanese Economy | WHAT REALLY HAPPENED

Four Reforms to Save the Lebanese Economy

In 2008, the Beirut Stock Exchange grew by 51%, the best performing exchange in the world at the time. Despite significant conflict in 2006 with Israel, the Lebanese economy was able to grow by at least 8% during the peak years of the global financial crisis. This was followed by a period of stable growth from 2011-2017. However, Lebanon’s economic fortune started to change. High government debt, a devalued currency, and an overreliance on exports put the Lebanese economy in an unstable position. As the country turns 100, a restructuring of the country’s economy is the birthday gift the citizens desperately need.

Lebanon has the third highest debt-to-GDP ratio in the world. Due to this tremendous burden, the government is forced to spend approximately half of domestic revenue on interest payments. When government revenues decrease, leaders turn to printing money and increasing taxes as the next best solution. Since the Lebanese pound is fixed to the US dollar, the government opted to create new taxes, such as a tax on voice messages. This was immediately rejected by the general population. These add-on taxes became a key driver of the current protests.

Protesters have taken to the street since 2019, demanding resignation of corrupt leadership and a need for political and economic reform. The explosions on August 4th proved to be the tipping point, leading to the resignation of many senior officials in the government. New leadership is a positive step, but economic reform is perhaps the most important tool to create a stable future. IMF Managing Director, Kristalina Georgieva, proposed four key reforms the country must take to recover from the current economic crisis. The future of the country depends on the government’s execution of these policies, with support from the international community.

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