Policy Briefs
Lebanon at Risk – The Uncertain Road to a New Growth Path
No.
PB 113
Publisher
ERF
Date
August, 2023
In a nutshell
- The deep reason behind the Lebanese financial crisis is a currency peg maintained for too long. The collapse of the old model of living on the capital account is a rare opportunity to rebuild the economy on firmer, more productive, and more sustainable footing.
- The depth and length of the current crisis are due to the unwillingness of the political elites to distribute losses and clean up the financial system. With no access to loans, firms have been unable to shift production to export. Capital flight has exacerbated the crisis.
- Besides the ongoing financial crisis, the social crisis and the crisis of the state are equally damaging and require attention. This creates difficult financial trade-offs. However, each of these crises can block a recovery if left unattended.
- A big push is the best way to exit the three crises simultaneously. This requires a convincing national program with broad national support and large external funding – a politically challenging task in current circumstances.
- In the meantime, a more balanced donor strategy is needed, including an effort to protect basic services, to keep the possibility of a revival of the Lebanese economy alive.
Research Fellows
Ishac Diwan
Director of Research, Finance for Development Lab,...
Authors
Henri J. Chaoul
Managing Partner, Levantine Partners