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Lebanon’s Economic Crisis Explodes, Threatening Decades of Prosperity Lebanon’s Economic Crisis Explodes, Threatening Decades of Prosperity
(3 days later)
BEIRUT, Lebanon — Flawed policies and sudden shocks have thrust Lebanon into its worst economic crisis in decades, with its currency collapsing, businesses shutting, prices for basic goods skyrocketing and the threat of hunger looming for its poorest people.BEIRUT, Lebanon — Flawed policies and sudden shocks have thrust Lebanon into its worst economic crisis in decades, with its currency collapsing, businesses shutting, prices for basic goods skyrocketing and the threat of hunger looming for its poorest people.
“They come to sell because they need to eat,” said Ali Sabra, a gold merchant in Beirut who pays cash to families selling dowries and wedding rings to buy food.“They come to sell because they need to eat,” said Ali Sabra, a gold merchant in Beirut who pays cash to families selling dowries and wedding rings to buy food.
“This time you sell your gold,” Mr. Sabra said. “What will you do next time?”“This time you sell your gold,” Mr. Sabra said. “What will you do next time?”
Lebanese have long stood out in the Middle East for not letting political upheaval or civil violence get in the way of enjoying the finer things in life. Night clubs and hotels stayed open though wars, and while the tap water was undrinkable and the electric grid unreliable, even the middle class could afford nice clothes, low-paid maids from Ethiopia or the Philippines and occasional foreign vacations.Lebanese have long stood out in the Middle East for not letting political upheaval or civil violence get in the way of enjoying the finer things in life. Night clubs and hotels stayed open though wars, and while the tap water was undrinkable and the electric grid unreliable, even the middle class could afford nice clothes, low-paid maids from Ethiopia or the Philippines and occasional foreign vacations.
Underlying that lifestyle was a longstanding government policy that kept the value of the Lebanese pound pegged to the U.S. dollar, allowing the Lebanese to interact seamlessly with the world economy.Underlying that lifestyle was a longstanding government policy that kept the value of the Lebanese pound pegged to the U.S. dollar, allowing the Lebanese to interact seamlessly with the world economy.
But that system has unraveled in recent months, fueling an economic collapse that has been exacerbated by a government-imposed lockdown aimed at stopping the spread of the coronavirus. Analysts warn that the downturn could pauperize the middle class, making it that much harder for the country to recover.But that system has unraveled in recent months, fueling an economic collapse that has been exacerbated by a government-imposed lockdown aimed at stopping the spread of the coronavirus. Analysts warn that the downturn could pauperize the middle class, making it that much harder for the country to recover.
“There are many sins and many sinners,” said Roy Badaro, a Lebanese economist. “The sins of the past have to be paid for today and in the future, so there is a distribution of pain to cover the costs.”“There are many sins and many sinners,” said Roy Badaro, a Lebanese economist. “The sins of the past have to be paid for today and in the future, so there is a distribution of pain to cover the costs.”
The result will be, he said, “a serious downgrade in lifestyle.”The result will be, he said, “a serious downgrade in lifestyle.”
Lebanon’s economic problems have been building for years. A nation of 5.4 million on the Mediterranean with a variety of religious sects and large groups of Syrian and Palestinian refugees, Lebanon has long suffered from internal conflict and spillover from the wars afflicting its neighbors. Its historically weak government has relied on increasing amounts of debt to pay its bills, while failing to carry out reforms that could have bolstered its economy or unlocked international aid. That has made it the third most indebted state in the world, and rampant corruption has further siphoned funds from state coffers.Lebanon’s economic problems have been building for years. A nation of 5.4 million on the Mediterranean with a variety of religious sects and large groups of Syrian and Palestinian refugees, Lebanon has long suffered from internal conflict and spillover from the wars afflicting its neighbors. Its historically weak government has relied on increasing amounts of debt to pay its bills, while failing to carry out reforms that could have bolstered its economy or unlocked international aid. That has made it the third most indebted state in the world, and rampant corruption has further siphoned funds from state coffers.
Clear signs of trouble surfaced late last year, when banks began limiting withdrawals and anti-government protests erupted across the country.Clear signs of trouble surfaced late last year, when banks began limiting withdrawals and anti-government protests erupted across the country.
The immediate breakdown was a nationwide shortage of dollars. Since Lebanon produces almost nothing for export, the country’s primary source of dollars has been large deposits from wealthy investors in the central bank, which were needed to maintain the link to the Lebanese pound.The immediate breakdown was a nationwide shortage of dollars. Since Lebanon produces almost nothing for export, the country’s primary source of dollars has been large deposits from wealthy investors in the central bank, which were needed to maintain the link to the Lebanese pound.
To keep those investments coming, the central bank offered ever-higher interest rates for large deposits, whose yields could be covered only by newer deposits at even higher rates.To keep those investments coming, the central bank offered ever-higher interest rates for large deposits, whose yields could be covered only by newer deposits at even higher rates.
That strategy, which analysts have likened to a state-sponsored Ponzi scheme, ran out of gas last year when new depositors suspected the policy was unsustainable and stopped coming. Soon, the real dollars in the bank were far short of the theoretical dollars that had been earned in interest on previous deposits.That strategy, which analysts have likened to a state-sponsored Ponzi scheme, ran out of gas last year when new depositors suspected the policy was unsustainable and stopped coming. Soon, the real dollars in the bank were far short of the theoretical dollars that had been earned in interest on previous deposits.
That shortage has now hit individual Lebanese account holders, whose banks have either limited dollar withdrawals or stopped handing out dollars altogether. At the same time, the Lebanese pound has lost about two-thirds of its value on the black market, further burdening the lives of people who once moved easily between the two currencies.That shortage has now hit individual Lebanese account holders, whose banks have either limited dollar withdrawals or stopped handing out dollars altogether. At the same time, the Lebanese pound has lost about two-thirds of its value on the black market, further burdening the lives of people who once moved easily between the two currencies.
The pain for average citizens is clear in the depositors lining up outside banks, often wearing face masks and standing in the sun, to see whether they can withdraw any of their own money.The pain for average citizens is clear in the depositors lining up outside banks, often wearing face masks and standing in the sun, to see whether they can withdraw any of their own money.
“My salary no longer has any value,” said Mirna Haddad, 54, an accountant waiting in line outside a Beirut bank last week.“My salary no longer has any value,” said Mirna Haddad, 54, an accountant waiting in line outside a Beirut bank last week.
While her salary in Lebanese pounds was modest, she had always been able to easily convert it into dollars to, say, buy a car or take occasional family trips to Greece. Now, that money is worth less, and her bank will not let her transfer it abroad to her son, a university student in France.While her salary in Lebanese pounds was modest, she had always been able to easily convert it into dollars to, say, buy a car or take occasional family trips to Greece. Now, that money is worth less, and her bank will not let her transfer it abroad to her son, a university student in France.
“Our whole life is going to change,” she said.“Our whole life is going to change,” she said.
Nearby stood a sales director for an events management company, Ghassan Nawfal, who said all but two of his company’s 30 employees had been put on unpaid leave. The two who remained were earning only half salaries — for now.Nearby stood a sales director for an events management company, Ghassan Nawfal, who said all but two of his company’s 30 employees had been put on unpaid leave. The two who remained were earning only half salaries — for now.
Behind him was Fouad Tawk, 53, who had retired after 24 years in the Lebanese Army with a pension that used to be worth $800 per month. Now it is worth just over $200.Behind him was Fouad Tawk, 53, who had retired after 24 years in the Lebanese Army with a pension that used to be worth $800 per month. Now it is worth just over $200.
“The pound went from the sky to the ground,” he said.“The pound went from the sky to the ground,” he said.
Mr. Tawk said he was struggling to make up the shortfall by doing carpentry work, which was hard to come by, and farming land in his village, although the prices of imported agricultural supplies have risen as well.Mr. Tawk said he was struggling to make up the shortfall by doing carpentry work, which was hard to come by, and farming land in his village, although the prices of imported agricultural supplies have risen as well.
“We used to be OK between the pension and the land, but now it has all collapsed,” Mr. Tawk said.“We used to be OK between the pension and the land, but now it has all collapsed,” Mr. Tawk said.
The crisis will fall hardest on Lebanon’s poor.The crisis will fall hardest on Lebanon’s poor.
In November, the World Bank warned that the portion of Lebanon’s population living in poverty could increase from 30 percent to 50 percent if the government did not act swiftly. But that was before the currency crash and the coronavirus pandemic hit, making matters worse.In November, the World Bank warned that the portion of Lebanon’s population living in poverty could increase from 30 percent to 50 percent if the government did not act swiftly. But that was before the currency crash and the coronavirus pandemic hit, making matters worse.
Last month, Human Rights Watch warned that millions of Lebanon’s residents, including more than one million Syrian refugees, were at risk of going hungry during the coronavirus lockdown if the government didn’t come to their aid.Last month, Human Rights Watch warned that millions of Lebanon’s residents, including more than one million Syrian refugees, were at risk of going hungry during the coronavirus lockdown if the government didn’t come to their aid.
Desperation has made the country’s protests more violent. Bank branches have been bombed and burned, and one protester was recently killed in the northern city of Tripoli after the security forces opened fire with rubber bullets and live ammunition.Desperation has made the country’s protests more violent. Bank branches have been bombed and burned, and one protester was recently killed in the northern city of Tripoli after the security forces opened fire with rubber bullets and live ammunition.
The crisis has struck blows at historic institutions. Two hotels that survived the country’s 15-year civil war have announced that they are shutting their doors, and the president of the American University of Beirut, one of the Arab world’s top universities, sent a letter to faculty and staff last week to prepare them for “perhaps the greatest crisis since the university’s foundation in 1866.”The crisis has struck blows at historic institutions. Two hotels that survived the country’s 15-year civil war have announced that they are shutting their doors, and the president of the American University of Beirut, one of the Arab world’s top universities, sent a letter to faculty and staff last week to prepare them for “perhaps the greatest crisis since the university’s foundation in 1866.”
In an interview, the president, Fadlo Khuri, said the university had to figure out how to protect the purchasing power of faculty whose salaries have been effectively reduced by the currency crash, as well as help students struggling to pay tuition.In an interview, the president, Fadlo Khuri, said the university had to figure out how to protect the purchasing power of faculty whose salaries have been effectively reduced by the currency crash, as well as help students struggling to pay tuition.
Updated June 5, 2020Updated June 5, 2020
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
But Dr. Khuri’s greater fear for Lebanon was that the crisis would impoverish the middle class and prompt a new wave of migration by the very people the country needs to rebuild its economy.But Dr. Khuri’s greater fear for Lebanon was that the crisis would impoverish the middle class and prompt a new wave of migration by the very people the country needs to rebuild its economy.
“The middle class is becoming day after day poorer and poorer,” Dr. Khuri said. “Some of the best and brightest are not just emmigrating, but this time they may permanently turn their backs on this country.”“The middle class is becoming day after day poorer and poorer,” Dr. Khuri said. “Some of the best and brightest are not just emmigrating, but this time they may permanently turn their backs on this country.”
The government has struggled to stop the tailspin.The government has struggled to stop the tailspin.
In March, it failed to make a $1.2 billion payment for foreign bonds, the first such default in Lebanon’s history. Its economic recovery plan, released on April 30, said the economy was “in free fall” and that Lebanon would seek $10 billion in aid from the International Monetary Fund. But previously promised aid has never arrived because Lebanon has failed to make progress on the funders’ required reforms.In March, it failed to make a $1.2 billion payment for foreign bonds, the first such default in Lebanon’s history. Its economic recovery plan, released on April 30, said the economy was “in free fall” and that Lebanon would seek $10 billion in aid from the International Monetary Fund. But previously promised aid has never arrived because Lebanon has failed to make progress on the funders’ required reforms.
Even if some version of the government’s plan is eventually enacted, the benefits could take years to reach people like Abu Haytham Sirhal, a vegetable merchant who buys in dollars and resells in Lebanese pounds and has watched his already thin profit margin disappear.Even if some version of the government’s plan is eventually enacted, the benefits could take years to reach people like Abu Haytham Sirhal, a vegetable merchant who buys in dollars and resells in Lebanese pounds and has watched his already thin profit margin disappear.
“I have never witnessed anything like this in Lebanon’s history,” said Mr. Sirhal, 80. “This is the worst period ever.”“I have never witnessed anything like this in Lebanon’s history,” said Mr. Sirhal, 80. “This is the worst period ever.”
Hwaida Saad contributed reporting.Hwaida Saad contributed reporting.