In June, there was a debate in our building about whether to rayyih al-moteur (‘rest the generator’) at night or during the day. We had electricity from the national grid for only one hour in 24. In July, the only way to cool down in the afternoon was to strip off and lie sweating on the apartment’s terrazzo floor. By August, diesel shortages meant that not even the rich could buy their way out of the sweltering blackouts. Beirut’s main public hospital ran out of diesel and turned off the air conditioning in most of its wards. ‘We really are in hell,’ its director tweeted.
According to a World Bank report in May, the suddenness and severity of Lebanon’s economic collapse makes it one of the ten ‘most severe economic crises … globally since the mid-19th century’. Economists struggle even to measure such basic indicators as inflation, unemployment and GDP contraction in a meaningful way. The World Bank calls it a ‘deliberate depression’, the result of a ‘political consensus on defence of a bankrupt economic system, which benefited a few for so long’, implicating the country’s entire political class and every government it has had since the 1990s.
Not so long ago, Lebanon’s banking sector was praised for performing an ‘economic miracle’. In 2009, Riad Salamé, governor of the Banque du Liban, was voted central banker of the year. Against the advice of the IMF, he had banned the purchase of subprime mortgage securities, insisted that investment in derivatives must be approved by the central bank and that bank reserves be maintained at a conservative 15 per cent in foreign currency deposits. As a result, Lebanon dodged the financial crisis in 2008. Capital flooded in, especially from the diaspora, and by 2016 BdL’s foreign-exchange reserves had more than tripled.
But capital began to dry up as the Syrian revolution turned to war, Western economies recovered, and the US threatened to impose sanctions on the Lebanese banking system unless it put pressure on Hezbollah by complying with more stringent background and money-laundering checks. In 2018, Salamé raised interest rates in an attempt to keep foreign investment flowing in, with banks frequently offering more than 15 per cent to those converting dollar deposits into Lebanese lira. Salamé called it ‘financial engineering’ and for a while it staved off crisis. But today it looks very much like the closing stages of a Ponzi scheme. Covid-19 and the explosion at the Port of Beirut last August were only the latest shocks to a system that was already beyond rescue.
The problems in the banking sector began in the 1990s, when government bond yields sometimes exceeded 30 per cent. Interest rates on individual savings accounts were never as high as that, which meant, in effect, that Lebanese banks could make huge profits just by lending to the state. As their profits swelled, and ever more government spending went on servicing the debt to the banks, the country’s infrastructure struggled. The state wasn’t able to provide 24-hour electricity, a reliable water supply, proper waste disposal or a public transport system. Taxation is regressive, skewed towards levies on goods and services (60 per cent of revenues). As the debt burden grew, reducing the capacity for public spending, governments imposed new regressive taxes: VAT was introduced in 2002 and increased in 2018. By then, as the economist Nisreen Salti wrote the following year, ‘$3 of every $5 in taxes [was] collected regressively … and used to finance the $9 that go straight to commercial banks out of every $20 spent by the government.’ The taxation system was a machine designed to create inequality. In October 2019, the government tried to introduce yet another regressive levy, on v0ice over internet calls, a so-called ‘WhatsApp tax’. The streets erupted in fury: the thawra had begun.
Since 1997 the Lebanese lira had been pegged at 1507 to the dollar, which remained the official rate. But the lira’s value on the open market was beginning to fall, and soon restrictions were placed on dollar accounts. In the first month of the protests, we were still allowed to withdraw $1000 in cash dollars; the limit was reduced to $500 a few weeks later, then brought down further. In March 2020, soon after the first Covid lockdown, we couldn’t take out US dollars at all, only their lira equivalent, at an exchange rate artificially set at 3900 to the dollar, when the black market rate – representing the real cost of many imported goods – was more than twice that. Since then, these dollar equivalents have been sarcastically known as ‘lollars’.
Throughout, to discourage dollar withdrawals, banks would simply shut, citing the ‘security situation’, or leave their ATMs empty. It smelled fishy: even during the 1982 Israeli siege and the 2006 July War the banks had stayed open. Meanwhile, the largest depositors were busy getting their money out of the country: it’s estimated that $6 billion was removed between October 2019 and the following July. Hundreds of Lebanese companies and individuals appeared in the Pandora Papers leak of offshore financial data. One of them was Salamé, the man who has run the central bank for nearly thirty years. Another was Najib Mikati, Lebanon’s richest man, who – as of last month – is also its prime minister.
Saad Hariri resigned the premiership in October 2019. His successor, Hassan Diab, resigned after the Port of Beirut explosion. Throughout this period, the central bank was, in the words of the World Bank report, ‘almost an exclusive policymaker’ in Lebanon. BdL publishes regular ‘circulars’ to set down rules. It decides, for instance, how many lira a dollar in a Lebanese bank is worth and how many of those lollars you can withdraw in a month, whether you can transfer foreign currency abroad to pay your children’s university fees, or whether you can access your savings to pay to be admitted to hospital abroad.
The central bank also decides which goods can be imported using BdL’s dollar reserves. In effect, this means it provides a subsidy for the goods on the list – a list that includes men’s razors, for instance, but not women’s sanitary towels – since they can be imported at below black market rates. Large importers, often with links to the political class, have made huge profits. The imported goods often disappear, hoarded by traders waiting for the subsidies to be lifted, or smuggled abroad to be sold at the higher rate, or temporarily withdrawn from the market to create artificial scarcity and black market demand.
In June the energy minister announced that fuel subsidies were unsustainable. A journalist asked what the vast majority of people who couldn’t afford unsubsidised fuel should do. Lebanon has no public transport to speak of, and the small number of privately run bus and minivan lines offer only a haphazard service. ‘Use something else,’ the minister replied. A screenshot mock-up of Beirut on Google Maps circulated on WhatsApp: an icon of a donkey had been Photoshopped in next to the signs for car and pedestrian.
Most petrol stations are only open for a couple of hours a day. The fuel queues – tawabeer al-dhill, or ‘lines of humiliation’ – stretch for miles down the coastal highway. Taxis have disappeared from the streets. In June our neighbours in Beirut organised picnic lunches to enliven the three-hour queue for petrol. In July people parked their cars in the queues overnight. In August there were reports of shootouts at petrol stations. On 14 August, protesters in the village of Tleil found fuel being hoarded in a warehouse by a local businessman with connections to the Free Patriotic Movement, the party founded by Michel Aoun, Lebanon’s president. Somehow, the fuel exploded and 28 people died in the fire. The protesters claimed that the businessman’s son had started shooting at them, accidentally hitting the tanker the fuel was stored in; in any case, he was arrested for starting the fire.
If you do get petrol, how much you pay for it depends on where your money is. Twenty litres will set you back 125,000 Lebanese lira. At the official, pegged exchange rate that’s $83. But if you’re fortunate enough to own real dollar bills – which we’ve taken to calling ‘fresh dollars’ – and exchange them on the black market then the petrol will cost you less than $7. Or, if you’re a member of the middle classes who deposited dollars in a bank account before October 2019 – dollars which can now only be withdrawn as ‘lollars’ – then you’ll end up paying $32.
On some days supermarkets close because the exchange rate is fluctuating so rapidly they don’t know how to price their goods. Most shops no longer use price tags: you find out how much you’re going to pay when you reach the till. A Unicef report estimates that 77 per cent of families in Lebanon don’t have enough food; in 30 per cent of families a child has to skip meals; 15 per cent have stopped sending their children to school. In June 2020, as food prices shot up, the army announced it would no longer serve meat in soldiers’ messes. Parodying Israel’s army propaganda, which likes to celebrate the IDF’s woke credentials, a joke circulated: Lebanon has the world’s first vegetarian army. In June this year, the army started offering helicopter rides to tourists as a way of raising money: $150 cash for a fifteen-minute ‘joyride’ for three.
In January, the World Bank approved a loan of $34 million to fund Lebanon’s Covid vaccination programme, providing enough doses to vaccinate a third of the population. A week after the first shipment arrived, MPs were caught jumping the queue by getting the Pfizer jab inside the parliament building. The World Bank’s regional head, Saroj Kumar Jha, threatened to suspend the loan. On TV, parliament’s deputy speaker, Elie Ferzli, called Saroj Jha mister farouj, a racist pun meaning ‘Mr Roast Chicken’. ‘You’re a liar and a hypocrite and should get out of Lebanon,’ Ferzli shouted before storming off the set. The Pfizer vaccine got nicknamed ‘Pferzli’ and images of the MP’s rant circulated online captioned ‘vaccine side effects’. It later emerged that Aoun, too, had jumped the queue, getting himself, his family and his aides vaccinated at the presidential palace.
When the anti-government protests began two years ago, the question people were asking was: ‘How do we get the politicians out?’ Now it’s ‘How do we get out ourselves? The country has a long history of emigration: the population of Lebanon is around six million, and there are seven million Lebanese in Brazil alone. It’s estimated that 40 per cent of doctors and 30 per cent of nurses have left since 2019. It’s usually referred to as a brain drain, but it seems to me that emigration has been the economic model for generations of rulers. Avoid progressive taxes, provide no public services: people will leave in large numbers, which is fine so long as the diaspora are still incentivised to park their money here – and years of artificially high interest rates ensured that they were. More recently, Lebanese politicians have used the threat of increased emigration as a bargaining tool: European governments are told that if they don’t stump up aid money for Syrians in Lebanon then they’ll be flooded with refugees. At the height of the protests, Aoun said of the demonstrators: ‘If they don’t think there are any decent people in government, then let them emigrate.’
There have been outbursts of protest this year, but nothing to compare with 2019. Most people are focused on survival. The economic crisis has crushed the uprising, not accelerated it. There are small-scale efforts to loosen the grip of the established sectarian parties. In July, I spent a Sunday ticking off names in elections for the Union of Architects and Engineers. The winners, by a landslide, were Al-Naqaba Tantafid (‘The Union Rises’), a coalition of anti-establishment activist groups. But this is a very long game. Meanwhile, the political class is waging a low-intensity war against activists. They arrest, beat up and sometimes torture critics for ‘libellous’ comments on social media. Protesters in Tripoli, already one of the Mediterranean’s poorest cities, are treated particularly brutally. ‘I come down from Tripoli to Beirut,’ one protester told the TV cameras,
and I’m met with rubber bullets, tear gas and insults from the security services. And then I get a question from the press about why I’m throwing stones. They blew up Lebanon, they blew up Beirut, and you’re holding me to account for a stone? A stone? … You’re holding us to account for throwing a stone when we have no other way to express ourselves and express our views … We don’t want to emigrate; we want to eat and be educated. Even if it takes ten years, we’re going to educate ourselves and throw them all out of the country … And then we’ll be our own representatives.
The language of siege, of living in a prison, is everywhere in conversation. Even the politicians have started to insist they’re under siege. ‘It is the only job in the world where you resign and then you’re stuck,’ Hassan Diab told the Financial Times in March, under the headline ‘PM stuck in office on less than $1000 a month’ – as if he was the victim of some kind of hostage crisis. His successor, Najib Mikati, said he was accepting the job because politicians are ‘ashamed to walk down the streets. I want to go to restaurants again! We want to live.’ The deeply unpopular former energy and foreign minister Gebran Bassil, Aoun’s son-in-law and current leader of the Free Patriotic Movement, complains that Lebanon is under ‘financial, economic and political siege’ rather than in a crisis for which he bears some responsibility. Bassil’s party has effectively been in power since 2016, but its unofficial slogan is ‘They’re not letting us work!’ ‘They’ might refer to almost anyone: foreign powers, other political parties, protesters, refugees.
After the Port of Beirut explosion, Hassan Nasrallah, Hezbollah’s leader, gave a rather pompous speech claiming that ‘opportunities on a national, regional and international level are born in the womb of disaster.’ Bassil parroted him on CNN, but without the gravitas or menace: ‘This big drama can be turned into a big opportunity.’ By ‘drama’ he meant the blast that years of government negligence – including his own – had enabled, a blast that killed more than two hundred people and left hundreds of thousands without a home.
When Emmanuel Macron visited Beirut in the explosion’s aftermath, he was heckled by the young people who had taken the clean-up operation into their own hands when the state did nothing. They begged him not to send aid through state institutions, despite the pain and hardship of the economic collapse. The ‘French initiative’ that followed was conditional on political reforms, which the politicians still refuse to implement. Nearly $11 billion in aid is being withheld.
At the beginning of the summer, Aoun said that he hoped for ‘a promising tourist season, and the arrival of lots of the Lebanese diaspora’ – bringing dollars with them. Around the same time my aunt got a call from her bank offering 12 per cent interest if she agreed to deposit $5000 for a period of … She laughed and put down the phone. The question is still: ‘How do we get out?’ Do you have a foreign passport? A visa? If not, many will contemplate the perilous journey across the Mediterranean. The first boats have already left.