Ailing economy leads to increased mental health challenges

As Lebanon slides deeper into financial crisis, calls to mental health support centres are skyrocketing. As Imogen Kimber reports the devastating decline in living standards appears to be taking a toll on people’s well being. #lebanoneconomy #suicide #economy

Source TRTWorld


Lebanon becomes 1st country in Middle East and North Africa to enter hyperinflation

PARIS — Lebanon could face its biggest crisis since its Civil War, economists are warning as the country’s currency hits new lows.

Lebanon is now the first country in the Middle East and North Africa to see its inflation rate exceed 50% for 30 consecutive days, according to Steve H. Hanke, a professor of applied economics at the Johns Hopkins University.

The sharp rise in prices for goods and services pushes the country further into crisis. High inflation means many goods have become unaffordable.

“We started receiving messages from educated people … emailing us just for help,” said Soha Zaiter, executive manager of the Lebanese Food Bank.

She added, “There is no middle class anymore.”

The Lebanese rely heavily on imports, which constitute 60% of consumed goods, according to Lebanese economist Roy Badaro. Because of the very high correlation between importation and consumption, the spike in the exchange rate to the dollar then translates into a massive increase in retail prices. Clothing and footwear items alone have seen a 345% annual rise in prices, according to Credit Libanais’ latest report. In addition, the lockdown measures taken to tackle the coronavirus pandemic, resulting in the shutdowns of small businesses and massive layoffs, has pushed the country to the brink.

COVID-19 has “a multiplier effect,” said Badaro.

Demonstrators gather at the Martyrs’ Square to protest unemployment and the economic crisis in Beirut, Lebanon on July 17, 2020.Demonstrators gather at the Martyrs’ Square to protest unemployment and the economic crisis in Beirut, Lebanon on July 17, 2020.Mahmut Geldi/Anadolu Agency via Getty Images

MORE: Crisis hits Lebanon’s hospitals, among the best in Mideast

According to Zaiter, more than half of the Lebanese population is living under the poverty line as a result. The World Bank estimates that 155,000 households are living under the extreme poverty line.

“If you compare the situation before and after, not only COVID-19, but even before the revolution started in October 2019 … now people are depending on NGOs because the government doesn’t have any plan for these people,” she said.

While the Lebanese authorities have pledged financial aid to the poorest 43,000 families, there are worries that it didn’t reach the right people.

“The list of data for the families was so old, some of them were already dead or not living in Lebanon anymore,” said Zaiter.

The nonprofit organization Embrace, which has a national suicide prevention helpline, said suicide reports have doubled in the country this year, jumping from an average of 200 calls per month last year to between 400 and 500 per month in 2020.MORE: Lebanon protesters call on government to resign amid crisis

On a visit to Lebanon on July 23, French Foreign Minister Jean-Yves Le Drian was blunt in his critique of the country’s leadership, saying, “Help us to help you.”

As talks with the International Monetary Fund have hit a stalemate, the Lebanese are left to rely on their diaspora for an influx of money.

“Venezuela has oil. Our oil is the diaspora,” said Badaro.

Lebanese pound banknotes are seen at a currency exchange shop in Beirut, Lebanon June 15, 2020.Lebanese pound banknotes are seen at a currency exchange shop in Beirut, Lebanon June 15, 2020.Mohamed Azakir/Reuters

Rabah’s cousin, who lives overseas, used to send money home to his family.

But “a lot of business shut down due to COVID and my cousin has not been paid for the last five months … now we have to send him money,” Rabah said.

The only way out of the crisis for many in Lebanon is through reform.

According to Makram Rabah, a history lecturer at the American University of Beirut, the core problem is that “no one has any trust in the political system.”

The Central Bank “has dug itself so deep” bailing out the country that “it’s incapable of doing anything,” Rabah said.

“This was the Central Bank’s original sin,” added Badaro, referring to the decision in 1997 to fix the rate of the Lebanese pound.

The country’s weakened position means it is at a crossroads.

“We are in the middle of a reality check about funding growth and our economy and the food even,” said Badaro.

Source abc News


Lebanon’s Dysfunctional Political Economy

Using the prospect of a flood of refugees as a bargaining chip in international negotiations, the government is happy to subsist on foreign-exchange reserves while waiting to collect geopolitical rents. Yet there is reason to hope that this strategy, which has already impoverished half the population, will fail.

PARIS – Lebanon’s economy has collapsed. There is little confusion about why or what is needed to save it. The question is why nothing has been done.

For the last two decades, Lebanon had been living off capital inflows, averaging 20% of GDP per year. Thanks to high interest rates, deposits – largely denominated in US dollars – grew to about 400% of Lebanon’s GDP, with much of the money being lent to the state to finance large fiscal deficits. Last July, the current-account deficit was over 25% of GDP, and public debt exceeded 150% of GDP. Government securities and deposits at the central bank accounted for 14% and 55% of bank assets, respectively, for a total sovereign exposure of nearly 70% of assets. Meanwhile, GDP growth has been close to zero since 2011.

The house of cards collapsed late last year, when large withdrawals led to a run on deposits, followed by a sudden stop to capital inflows. By the beginning of this year, Lebanon was mired in a triple crisis: both the state and the banks were bankrupt, lacking liquidity and unable to borrow, and the country suffered from a yawning external deficit.

In March, the government announced that it could not meet its debt-repayment obligations. Hoping to stave off a sovereign default, it then worked with international experts to develop an economic-reform plan that would address the economy’s weaknesses, including by reducing public debt, shrinking the fiscal deficit, and devaluing the Lebanese pound. A banking-sector restructuring – with a significant share of the immense losses (about $90 billion) set to be borne by bank owners and large depositors – was also planned.

So far, not a single step has been taken to implement any of these reforms. Lebanon’s government did request some $10 billion from the International Monetary Fund, but negotiations have gone nowhere. In the meantime, the authorities have not even imposed capital controls – the most fundamental response to a financial crisis.

Progress has been made toward shrinking the external deficit, but not in a way that should be welcomed. Imports have collapsed by nearly half since 2018, owing to the currency crisis. This, together with a lack of access to credit and the COVID-19 shock, has caused many firms to shut down. Meanwhile, GDP has declined by double digits, unemployment has soared above 30%, and the poverty rate has skyrocketed to 50%, decimating the middle class. A human-capital exodus has begun.

In this context, the government’s failure to act may seem shocking. Yet torpor is in Lebanon’s political DNA. The country has a byzantine sectarian power-sharing system, often paralyzed by squabbling and corruption. Lebanon’s political elites know that the prospect of a flood of refugees is a powerful bargaining chip in international negotiations, so they are happy to subsist on foreign-exchange reserves while waiting to collect geopolitical rents.

Worse, Lebanon’s political and economic elites – there is considerable overlap between them – may be deliberately seeking to shift the losses resulting from their economic mismanagement onto the population. In May, the Association of Banks in Lebanon proposed its own economic-reform plan, which recommends using state assets to avoid damaging banks. In other words, ordinary people would bear the burden of adjustment.

Moreover, the central bank has fired up the printing press, inflating away its pound-denominated holdings in an effort to bolster its foreign-exchange reserves. The pound has lost 80% of its value in just nine months, with year-on-year inflation having reached 90% in June. At the same time, withdrawals from dollar-denominated bank accounts are being taxed at 50% or more, by converting them at the official exchange rate, rather than the much more advantageous parallel rate.

This approach – essentially an adaptation of Argentina’s “Corralito,” the deposit freeze that was enacted in 2001 to halt a bank run – pushes losses onto the middle class, whose only option is to live on what remains in their bank accounts. It is also extremely costly economically. Absorbing the losses will take years, during which Lebanon will have to cope with a lack of capital inflows, a monetary anchor, or trust in the currency and banking system.

At that point, Lebanon’s elites seem to hope, the country will have created enough fiscal space that they can secure a favorable deal with international creditors and reprise their plundering of the state. This would set the stage for a grim future, in which elites claim an even larger share of a much smaller pie.

Yet there is reason to hope that they won’t get their wish. Last October, a national protest movement emerged, fueled by years of pent-up rage. In recent months, that movement has begun to mature, with protesters organizing into groupings that aim to overhaul the country’s political system.

Of course, Lebanon’s sectarian political system will not be upended easily, not least because sectarianism feeds on fear and insecurity. But the scale of the current crisis has shattered the regime’s legitimacy. Even Iran-allied Hezbollah, which has thus far defended a political arrangement that protects its weapons, is fast losing popularity among its constituency.

It helps that the international community is, for once, standing firm in its demands for reform. Though this will probably cause the crisis to worsen in the short term, as Lebanon’s elites attempt to wait out their international interlocutors, it could ultimately force the country to enact real change.

Source: Project syndicate


Moody’s downgrades Lebanon’s rating to C from Ca

New York, July 27, 2020 — Moody’s Investors Service (“Moody’s”) has today downgraded the Government of Lebanon’s issuer rating to C from Ca, and has not assigned an outlook to the rating. Moody’s also downgraded Lebanon’s senior unsecured Medium Term Note (MTN) Program rating to (P)C from (P)Ca, and affirmed the other short-term rating at (P)NP.

The C rating reflects Moody’s assessment that the losses incurred by bondholders through Lebanon’s current default are likely to exceed 65%. The country is steeped in an economic, financial and social crisis, which very weak institutions and governance strength appear unable to address. The collapse of the currency in the parallel market and the concomitant surge in inflation fuel a highly unstable environment. In the absence of key steps toward plausible economic and fiscal policy reform, official external funding support to accompany a government debt restructuring is not forthcoming.

The decision not to assign an outlook to the rating is based on the very high likelihood of significant losses for private creditors and the fact that C is the lowest rating in Moody’s rating scale.

Lebanon’s long-term foreign currency bond ceiling remains unchanged at Ca while the foreign currency deposit ceiling has been lowered to C from Ca previously. The long-term local-currency bond and deposit ceilings have been lowered to Caa2, respectively, from Caa1 previously. The short-term foreign currency bond and deposit ceilings remain Not Prime(NP).



Lebanon is steeped in a severe economic, financial and social crisis, with the level of economic activity plunging at a fast rate, the currency plummeting in the parallel exchange rate market, inflation skyrocketing, and an increasing part of the population without a job or income prospects. On 16 March, Lebanon defaulted on its international bond due on 9 March after the grace period expired. On 23 March, Lebanon announced it would cease servicing other outstanding foreign-currency debt; four days later, the public debt restructuring commitment was extended to include local-currency debt.

Recurring delays with the implementation of fiscal and economic policy reforms, outlined in the government’s reform program presented on 28 April as basis for negotiations with the International Monetary Fund (IMF) for an external support package to accompany a government debt restructuring, have stalled discussions with the IMF and with other international official donors. Limited progress has been achieved in key prerequisites, including a forensic audit of the Banque du Liban (BdL), the adoption of comprehensive capital controls legislation, and a general consensus among domestic stakeholders in favor of the government’s debt restructuring and reform plan. In this environment, Moody’s expects ultimate losses to private creditors to exceed 65%, prompting positioning of the rating at the lowest level in the rating scale.

Exhausted fiscal and monetary policy implementation capacity and diminished governance performance, especially with respect to control of corruption, inhibits the likelihood of a rapid transition to a new and more sustainable growth model once the debt restructuring is implemented. Over the longer term, a lower growth potential and a weak track record of fiscal discipline reduce the sovereign’s ability to carry debt, warranting a deeper debt write-off that is consistent with the C rating category, or a higher probability of future redefault in the event of insufficient effective debt relief to restore long-term debt sustainability.

The continued drawdown of Lebanon’s foreign exchange reserves is reflected in the acute devaluation of the local currency in the parallel market by over 80%. This is fueling significant import compression and contributing to a spike in inflation readings to almost 90% year-over-year as of June 2020 from 6.7% at the end of 2019. The resulting erosion of consumers’ purchasing power accompanied by investment contraction deepen the expected double-digit economic slump in 2020 and set the stage for severe social disruptions.

Moody’s projects the debt/GDP ratio to increase further to about 200% of GDP in 2020, driven by the exchange rate effect assuming an adjustment in the official peg to LBP3,500 per US dollar as outlined in the government’s reform plan. Looking forward, Moody’s projections show that the debt trajectory remains particularly sensitive to adverse growth and foreign exchange dynamics, underscoring the potential for further loss accumulation in the absence of a restructuring agreement with the support of the IMF. Access to previously pledged international investment support is conditional on the implementation of an IMF reform program, neither of which are likely to be secured in the next few months.


Environmental considerations are relevant for Lebanon’s credit profile, in particular through the impact of climate change on the tourism industry. Water shortages will likely become more frequent and pervasive due to increased demand from agriculture and industry, constraining growth unless they are addressed by effective policies. Waste management also represents a chronic challenge.

Social considerations are one of the key credit drivers of the sovereign rating. Sectarian fragmentation leads to frequent protracted negotiations between political parties and government stalemates that contribute to economic and financial instability, reflected in Moody’s assessment of heightened domestic political risk.

Governance considerations are a driver of today’s rating action. Sectarian fragmentation also impacts governance with control of corruption and political stability representing key challenges. The BdL’s reduced monetary and financial policy effectiveness in light of exhausted external buffers adds to the government’s weak fiscal policy track record, thus driving Moody’s very weak overall governance assessment.


C is the lowest rating in Moody’s rating scale. Moody’s currently believes that if there are any upward movements in Lebanon’s sovereign rating after the debt restructuring, they are likely to be limited for a considerable period of time. It is unlikely Lebanon’s rating would move from its current position prior to restructuring, given the extent of macroeconomic, financial and social challenges and Moody’s expectation of very significant losses.

For Lebanon’s issuer rating to rise above levels associated with very high probability of future default and significant losses, the implied pace of fiscal consolidation and/or structural reform implementation would be much faster than is currently expected, over a number of years. A further precondition for a substantive upgrade would also be that the key drivers of the country’s debt dynamics—such as economic growth, interest rates, privatization revenue, and the ability to generate and sustain large primary surpluses—were seen to be evolving in a way that would ensure debt sustainability in the future.

GDP per capita (PPP basis, US$): 15,049 (2019 Actual) (also known as Per Capita Income)

Real GDP growth (% change): -6.9% (2019 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 6.9% (2019 Actual)

Gen. Gov. Financial Balance/GDP: -11.4% (2019 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -23.2% (2019 Actual) (also known as External Balance)

External debt/GDP: 163.8% (2019 Estimate)

Economic resiliency: b3

Default history: At least one default event (on bonds and/or loans) has been recorded since 1983.

On 23 July 2020, a rating committee was called to discuss the rating of the Government of Lebanon. The main points raised during the discussion were: The issuer’s economic fundamentals, including its economic strength, have materially decreased. The issuer’s institutions and governance strength, have materially decreased. The issuer’s fiscal or financial strength, including its debt profile, has materially deteriorated. The issuer has become increasingly susceptible to event risks.

The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019 and available at Alternatively, please see the Rating Methodologies page on for a copy of this methodology.

The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable.


For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at:

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on

Please see for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on for additional regulatory disclosures for each credit rating.

Elisa Parisi-Capone
Vice President – Senior Analyst
Sovereign Risk Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Marie Diron
MD – Sovereign/Sub Sovereign
Sovereign Risk Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Source: Moody’s


Lebanon swings between humor and tragedy as economy crumbles

There are few bright sides to life in Lebanon, where the economy is verging on complete breakdown. But while some have shown sympathy with those committing “hunger crimes,” others have taken to barter and banter to cope.

The first signs of Lebanon’s coming collapse appeared when its banks started limiting withdrawals amid nationwide protests late last year. By May it was clear the country’s financial system was crumbling. The currency was in free fall and with it the nation’s economy. Demonstrators responded with typical dark humor, carrying the Lebanese lira off in a coffin, echoing Ghanaian pallbearers.


Lebanon faces record power cuts as economy worsens

Lebanon has been plunged into darkness as record power cuts grip the country amid worsening economic conditions.

Source TRT World


What is the Lebanese crisis hiding for freelancers and the self-employed?

In the midst of the COVID-19 pandemic that continues to threaten many lives and bring our country to its knees, the financial and economic crisis exploded –leaving Lebanon in extreme chaos.

Despite pledging to cap the exchange rate at LL 3,200 to the dollar, the Lebanese government failed the people once again. The Lebanese Lira depreciation persists, reaching approximately LL 7,000 to the dollar on the black market last week.

The Lebanese workforce is taking the hit of the collapsing economy, as the incomes of employees are losing value along with the currency depreciation.