Analysis: Relax Everyone, Lebanon is Not Bankrupt 

Published April 7th, 2022 - 08:39 GMT
Analysis: Relax Everyone, Lebanon is Not Bankrupt 
A file picture shows a Lebanese demonstrator demonstrating outside the Electricite du Liban (Electricity Of Lebanon) national company headquarters in the Lebanese capital Beirut. (AFP)

So Lebanon is not bankrupt after all. Relax everyone the country is still moving. Actually for the man, or woman in the street, the economic situation can't get any worse - the currency is failing, huge national debt, exorbitantly high cost of living. But Lebanon is alive, well (not so well) and kicking as a matter of fact!

But the man who got the cat among the pigeons is the Lebanon's Deputy Prime Minister Saadeh al-Shami when he came out with a flagging, glaring headline, some, especially the economists, would say preposterous, when he cried out "the state and the Banque du Liban are bankrupt."

This perked the ears of the media, the social media, and everyone who are listening. What does that mean! 'Oh my God," ruins, disaster in our midst, the country is gone. But can I just say relax, everyone the country Lebanon, has not gone away, everybody is still there intact, well almost, people are still going to buy stuff, well almost.

The Governor of the Central Bank Riad Salameh quickly come to the rescue. He said no Lebanon is most definitely not bankrupt. He was off course talking about the Central Banks, whose preferred terminology in French, Banque du Liban.

Salameh who has been in his job since 1993 and has a BA degree in Economics and has been credited for stabilizing the Lebanese Lira, though apparently not any more for the currency is rapidly sinking ( presently 27,000 Liras to the dollar with fluctuation the skies the limit) and not amount "technical fixing" can draw back the fall. 

But hold on a second. The Lira can be fixed. Salameh and his auspicious are already in a "negotiating process" with the World Bank to produce an economic plan that is supposed to bail Lebanon out or at least stop the drainage, get the economy moving, lower soaring unemployment and put the brakes on the spiraling prices and cost of living. 

So hurry up, get the wheels moving, the train at the station won't wait for ever! But this will take time; and unfortunately time is in short supply for the Lebanese like many, many people in the Arab world have had enough, they long been protesting in 2019 and a bit before that their dire situation. 

It was lucky for the powers that be, namely states, governments and rulers that the end of that year saw the onset of the Coronavirus with its highs in 2020 and 2021, and which brought with it incessant lockdowns, closures, masks and social distancing. 

The Lebanese economy, like the businesses of the Arab world and internationally fared no better. In Lebanon, the situation got worse and this may explain, its present crisis that became more acute, underlined off course by the Beirut Port Blast in 2020 that killed around 217 people and sent the state into a tailspin because there was a political deadlock in government formation and that meant world financial institutions stopped lending money to Lebanon.

All this is under the bridge now, well, supposedly. Lebanon, is not quite there. As the fight goes on whether Lebanon is bankrupt or not and probably it isn't, we wait for the fixing by by the World Bank. There is still tight restrictions on how much money people can get out of their bank accounts, but this will probably change in the near future.

And hence, we are told today that Lebanon faces a liquidity issue and not a solvency problem which means its inability to meet its long-term liabilities. If that were the case it would not be able to pay its debts and hence bankruptcy.

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