Diego Ibarra Sanchez / Stringer
Lebanese protesters hurled petrol bombs at the Central Bank and barricaded streets with burning tires Thursday night, in chaotic protests triggered by the country's nosediving currency.
Angered by a collapse in the value of the Lebanese pound, which has slashed their purchasing power and compounded the country's economic misery, thousands took to the streets in cities across the country. Sporadic clashes broke out as demonstrators pelted security forces with stones and soldiers fired tear gas at crowds.
In the northern city of Tripoli alone, where the local branch of the Central Bank was set ablaze, more than 40 people were injured, according to the Lebanese Red Cross.
The protests, which prompted Prime Minister Hassan Diab to hold an emergency Cabinet meeting Friday, were triggered by a sharp free fall in the value of the Lebanese pound, which hit new lows on the black market Thursday.
"People have no work, no food to eat. They cannot buy medicines, nappies or milk for their children," one protester in Beirut, Haitham, told AFP.
The Lebanese pound (also known as the lira), officially pegged at 1,500 to the US dollar for more than two decades, has lost more than 70 percent of its value since October, when the country slid into a worsening financial crisis. Its value dropped by 25 percent in recent days, with money changers reportedly selling dollars on the black market at a rate of 5,000 pounds.
The sharp collapse of the local currency, with which most Lebanese are paid, has led to rampant inflation and soaring prices for basic necessities in a county that imports about four-fifths of what it consumes. For most Lebanese, the devaluation has halved their effective purchasing power, according to Heiko Wimmen, the International Crisis Group's project director for Lebanon.
"Lebanon imports nearly everything it consumes, and needs dollars to pay for these imports, of which there are not enough in the system," he told VICE World News.
Due to structural problems with the country’s economy, which functioned like "a giant state-sponsored Ponzi scheme", the country could no longer attract inflows of U.S. dollars needed to pay for its imports.
That’s led the country’s Central Bank to ration out its dollar reserves to importers of essential items like fuel, wheat and medicine. "Everybody else who imports stuff needs to go to the black market to change the liras he receives from his customers into the dollars he needs to pay his suppliers," he said. "So there is a huge imbalance between supply and demand that drives the dollar against the lira."
Lina Khatib, director of the Middle East and North Africa program at the Chatham House think-tank, said the collapse of the Lebanese pound was the product of decades of economic mismanagement.
"The peg of the Lebanese pound to the dollar is an artificial peg," she told VICE World News.
"It gave the impression of economic stability while the state's foreign currency reserves were in reality being depleted. Banks were lending money to the state at exorbitant interest rates while much of the foreign aid and investment money flowing into the country was syphoned off by its ruling elites."
The currency collapse has only added to the woes of a country already enduring a major economic crisis that was intensified by the coronavirus lockdown measures imposed in mid-March. Tens of thousands of Lebanese have lost jobs in the past six months, driving the unemployment rate to 35 percent, while 45 percent of the country is in poverty.
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The latest freefall in the currency ratchets up the pressure on Diab, who came to power in February after the previous government was toppled by a wave of protests over economic mismanagement and corruption. His government, which defaulted on its $31 billion debt for the first time in March, is holding talks with the International Monetary Fund for a reform program it hopes will secure billions of dollars in financing and help lead to an economic recovery.
But no solution is yet in sight, while the protests, which had tapered off with the arrival of coronavirus, have now returned with a violent edge. Wimmen said Lebanon's crisis could be set to take a dark turn if protests turn into hunger riots and security forces, paid in an increasingly valueless currency, are unable to control the situation.
"We are moving towards a complete shutdown of the economy and shortages. The mood of protesters will turn more and more towards desperation, and behavior may become destructive,” he said. “The mid-term scenario is that state capacity deteriorates and institutions disintegrate.”