A crisis is witnessed that every time there is some clash between the governing body and the common people of a country, there arises some sort of crisis that can never be avoided unless and until the voices of the common people are heard, their problems are sorted out and their welfare is maintained.
If that is not done, it can even give rise to a potential revolution. Such a thing happened in Lebanon. Lebanon is currently facing the worst economic crisis since the 1975 – 90 civil war. The reason why Lebanon entered this grave financial crisis is because of the civil protests and the economic slowdown.
The Lebanese government is based on nepotism and sectarian identity. The political system of the country is completely corrupted with the government being unable to provide even basic services like electricity and water. Proper disposal of waste is also not done as a result of which piles of garbage are getting accumulated in various cities.
The residents of the country were already frustrated with the political infrastructure and to add more fuel to the fire, on October 2019, government-imposed taxes on gasoline, tobacco and on phone service applications like WhatsApp. Since the local phone services in Lebanon are quite expensive, people relied on applications like WhatsApp for their telecommunication services. Such imposition of tax burdened the citizens further deepening the Lebanese crisis.
The rise of the flames:
People soon started crowding streets and shouting slogans like ‘all of them means all of them’. The residents demanded a change in the poor infrastructure of the governing bodies so that the welfare of the citizens is preserved. The government’s failure to protect the nature and the people from a potential climate crisis and also, its ignorance towards the impending Lebanese financial crisis excruciatingly angered the citizens. The people finally reached their saturation point and took to the streets so that their voices could be heard.
Right after the inflows from overseas stopped. Followed by the transfer of billions of dollars from Lebanese to Swiss and European banks took place. Due to this, the banks struggled to maintain its financial stability and clear out huge debts. The common people could hardly access their cash because of Lebanese crisis. Rates of poverty and inflation increased. Only people from the ruling class having certain connections with higher authorities could withdraw money from banks. Such uneven distribution of cash among the people aided the emerging black markets.
Moreover, due to the protests taking place throughout the country, banks and markets have been closed which is further causing depletion in the economy of Lebanon.
The degrading banking system and its effect on the economy:
- The banks have lost $10 billion in deposits from August to December (2019).
- The supplies of foreign currency at the respective banks have fallen below $8 billion.
- The strategies employed to raise capital have failed because of low book values of banks. Also because such strategies were posing a threat to shareholder’s positions.
- 70% of bank assets are in debt.
- While the government is focusing on repaying the foreign holders, the cash deposits of the citizens are under potential threats.
Other Effects from the Lebanese Crisis:
- In order to clear their foreign debts, the government is restricting people from withdrawing cash from banks (or from ATMs). This is leading to a rise in poverty rates.
- Currently, the banks are having problems in opening letters of credit.
- In most banks of Lebanon, the customers are not getting full interest on their deposits.
- A former treasury head at one of Lebanon’s largest banks estimates that banks’ dollar liquidity overseas has fallen to 3%.
- Other foreign banks have also started weakening correspondent relationships with Lebanese banks and have also started reducing their exposure in Lebanon because they do not want to bear risks. This would definitely act as an obstacle for Lebanese banks to regain their financial stability.
- Transfer of billions of dollars from Lebanese to Swiss and European banks is also one of the reasons for its degradation.
How are the banks and the government trying to control the Lebanese crisis?
People of higher authorities are acknowledging the fact that new policies of the banking system are immediately needed to save Lebanon from this financial crisis . The common people have been assured of a newly formed government in contrast to the earlier sect – religious quota system of appointment of political leaders.
Although the banks have lowered their rates of deposits on the US dollar and Lebanese pound by 1%. The rates have now come down to 4% on the US dollar and 7.5% on Lebanese pounds. Although such measures are taken, it is highly uncertain that the banks will be able to resolve this financial crisis. Unless the protests cease and the drop in foreign reserves of the central bank due to economic slowdown has been recovered.
Lebanese crisis: What do the common people have to say about this?
Moreover, people work hard and save up their money in the hopes of gaining a promising future. Citizens are worried because they won’t have any access to their deposits due to the inefficient banking system of Lebanon. They are also worried because of the financial crisis that it is currently facing. Even the promise of a new government is not enough for the citizens to believe that all the money they had saved will never return back to them. Poverty is increasing at a high rate since people cannot withdraw cash from banks or from ATMs.
Therefore, The people thereby want a revolution in their country. They want their voices to be heard and want the government to take full responsibility for their welfare. Starting from a methodical administrative system to proper sanitation, the citizens want it all. They need a change and a promising future. Protestors say that if the revolution is the answer to these issues, they are ready to go for all of it.