Following Sri Lanka's serious shortage of foreign exchange, shortage of materials, high prices, and shortage of power supply, the country was on the verge of bankruptcy, Lebanon's Deputy Prime Minister Shami announced without warning on Monday (4th) that "Lebanon is in a state of bankruptcy, and the Central Bank of Lebanon is also in a state of bankruptcy. That's a huge loss."
According to foreign media reports, Shami commented on the country's economic situation in an interview with a local TV station, saying that "Lebanon is in a state of bankruptcy." He said that the losses caused by the bankruptcy will be shared by the central and local governments and the Lebanese central bank, and there is no objection to the distribution of responsibilities for the losses.
"The indisputable fact is that we can't live in denial anymore, we can't open (bank) withdrawals to everyone, and I hope we're in normalcy."
Lebanon has faced a tough financial situation since 2019. In this regard, then the Lebanese Deputy Prime Minister Shami came forward again to emphasize to the local media that he had been talking about "the government's inability to make a significant contribution to making up for losses in the financial industry", "which means it has no liquidity." Subsequently, the press office of Lebanese Prime Minister Najib Mikati also said in a statement that Deputy Prime Minister Shami's statement on Lebanon's declaration of bankruptcy was "fragmented" and that he was referring to "liquidity, not repayment." ability". However, Mikati's office did not elaborate further on this.
According to the relevant regulations, "bankruptcy" means that the government is unable to pay debts and interest as they come due. Among them, one of the reasons for the bankruptcy of a country is a lack of liquidity, when a country is temporarily unable to repay its debts and pay interest due to its inability to liquidate its asset base quickly, it may declare “bankruptcy”. However, Dr. Anis Abu Diab, a member of the Lebanese Economic and Social Council, said in an interview that "while Lebanon has [really] faltered in repaying its debts, it is not yet a bankrupt country".
Lebanon's central bank governor Salamé was also quick to issue a statement denying that he had led the central bank's bankruptcy for 30 years. “Despite the losses in Lebanon’s financial sector, the central bank is still fulfilling its mandate under the law, and the news of the central bank’s bankruptcy is untrue.”
Lebanon, located on the east coast of the Mediterranean Sea in southwestern Asia, borders Syria to the east and north, Israel to the south, and the Mediterranean Sea to the west. Since 2019, due to the explosion in Beirut and the impact of the new crown epidemic (on August 4, 2020, 2,750 tons of ammonium nitrate stored in the warehouse of Beirut port, the capital of Lebanon, exploded, killing nearly 200 people and injuring more than 6,500 people). , 300,000 people were made homeless overnight. The explosion caused direct economic losses of 4.6 billion US dollars and indirect losses of more than 10 billion US dollars), and Lebanon fell into a serious economic crisis. Even the World Bank warned that the current economic crisis in Lebanon is likely to be one of the three worst economic crises in the world since the mid-19th century.
According to World Bank data, between 2019 and 2021, the scale of Lebanon's economic contraction has reached 58%, and the gross domestic product (GDP) has plummeted from about 52 billion US dollars in 2019 to 21.8 billion US dollars in 2021. The degree of contraction is The best in the world. In 2021, Lebanon's public debt will increase to $100 billion, equivalent to 212% of the country's GDP. That makes Lebanon the fourth-highest debt-to-GDP ratio in the world, after Japan, Sudan and Greece, the World Bank said.
Lebanon is currently in the midst of "one of the world's worst economic collapses in 150 years" as assessed by the World Bank. The World Bank also forecasts that the Lebanese economy will shrink by 10.5% in real GDP in 2021, on top of a 21.4% contraction in 2020.
Lebanon's currency has lost more than 90 percent of its value in the past two years, and poverty rates have soared, with more than three-quarters of Lebanon's population living below the poverty line, according to UN figures. According to Joanna Wronecka, the UN Special Coordinator for Lebanon, 90% of the 1.5 million Syrian refugees living in Lebanon, who account for almost a quarter of the country's population, live in extreme poverty.
In March 2020, Lebanon defaulted on its sovereign debt for the first time as foreign exchange reserves fell to "critical and dangerous" levels.
In 2022, affected by the conflict between Russia and Ukraine, prices in Lebanon will fluctuate sharply again. You must know that the country relies heavily on imports, and 60% of the total wheat consumption comes from Ukraine and Russia. In response, Lebanese economist Elie Yakuri even warned that the Russian-Ukrainian conflict would evolve into Lebanon's own crisis. He also made a special explanation with flour, "The price of one kilogram of flour was 1,000 or 2,000 Lebanese pounds in the past, but it may rise to 40,000 Lebanese pounds in the future." In short, due to the impact of political, economic, epidemic and other factors, Lebanon has , the Middle Eastern country is going through the worst economic crisis in its history.
Regarding the current social and economic situation in Lebanon, some buyers' production and business activities are affected by social unrest in the country and the shortage of domestic dollars, resulting in payment arrears. Coupled with the current influx of Russia and Ukraine and the global epidemic, the tourism industry, which is Lebanon's main source of foreign exchange income, will be further affected.
It is expected that business risks will further increase as the multiple political and economic situations in Lebanon continue to deteriorate. Especially in the current situation where Lebanon's exchange rate has plummeted, the local currency has depreciated, and the economy is facing high risks, importers are likely to use this loophole to harm the interests of suppliers due to cost pressures.
