The new Lebanese President, Joseph Aoun, will face a bumpy road due to political, economic and diplomatic challenges, after the devastating crises that the country has been exposed to since 2019. He will be in dire need of a helping hand from the international community to achieve economic reforms that stop the economic, monetary and banking deterioration.
Below are the most prominent economic challenges that Lebanon has been exposed to since 2019, when it suffered successive declines in the exchange rate of its local currency, the lira, until today.
Financial and banking collapse
Since 2019, Lebanon has been suffering from a financial collapse that is considered one of the worst crises in the modern era, according to the World Bank, as the Lebanese pound has lost more than 98% of its value to an average of 90,000 against the dollar from 1,500 previously.
While confidence in the banking system has completely collapsed, banks that were once a symbol of stability have become unable to meet requests for withdrawals in dollars, which has led to the erosion of citizens’ savings.
The biggest challenge facing the new president is to restructure the banking sector and restore confidence between citizens and investors.
This task requires cooperation with international institutions such as the International Monetary Fund, which declined to enter into an economic reform plan with Lebanon several years ago.
The new president also needs to develop a plan to recapitalize banks and manage sovereign debt, which exceeds $90 billion.
Inflation and rising prices
The Lebanese are living under the weight of hyperinflation, as the prices of food and basic goods have skyrocketed.
According to United Nations statistics for the year 2023, more than 80% of the population lives below the poverty line amid high inflation, which at some stages exceeded 300%, which affected the purchasing power of citizens and made securing needs a daily challenge.
To deal with this crisis, President Aoun needs to put in place urgent economic policies, such as enhancing food security, encouraging local production, and supporting the most vulnerable groups through effective social protection programs.
Energy and infrastructure crisis
Today, Lebanon suffers from an inability to meet the local market’s supplies of energy derivatives in addition to the fuel used in generating electricity, which has led to the recovery of the black market to provide fuel.
The energy sector in Lebanon is also among the most failed, as citizens suffer from power outages for long hours every day, and depend on private generators at exorbitant costs.
The crisis is due to decades of mismanagement and corruption, which has made electricity production expensive and unsustainable.
The elected president must develop a comprehensive plan to reform the electricity sector, which includes investing in renewable energy, increasing the efficiency of power plants, and reducing technical waste, according to a previous study by the World Bank.
Public debt and budget deficit
The Lebanese public debt is considered among the highest in the world as a percentage of GDP, exceeding 150% by mid-2024, while the general budget suffers from a chronic deficit as a result of unjustified spending, tax evasion, and weak revenues.
According to a draft of reforms that existed between Lebanon and the International Monetary Fund, the challenge here lies in implementing radical financial reforms that include rationalizing government spending, improving tax collection, combating rampant corruption in state institutions, and restructuring debt in line with the economy’s ability to recover.
Relations with the international community
Lebanon urgently needs the support of the international community, whether through humanitarian aid or soft loans.
However, this support is conditional on implementing real reforms, as donor countries and the International Monetary Fund have repeatedly expressed their willingness to help, but on the condition of implementing transparency and combating corruption.
This requires President Aoun to build strong relations with the international community and demonstrate serious commitment to the reforms required to restore donor confidence.
Unemployment and brain drain
Unemployment rates rose sharply to exceed 30% by early 2024, with higher levels among young people. This situation has led to a mass exodus of talent, especially in the health, education and engineering sectors.
Basic sectors such as health and education have also been severely affected by the economic crisis, while hospitals suffer from a lack of funding and medical equipment, and schools face difficulty in securing teachers’ salaries and providing an appropriate educational environment.
While corruption is considered one of the most prominent causes of the economic collapse in Lebanon, public institutions suffer from mismanagement and nepotism, which hinders the implementation of any serious reforms.
