Cash-strapped Lebanon struggles amid the coronavirus crisis

Various sectors in Lebanon, a country grappling with its worst economic crisis in decades, have been hit hard by the measures imposed to stem the spread of the coronavirus.

al-monitor Volunteers sort boxes with food for the needy, as the spread of the coronavirus continues in Beirut, Lebanon, April 5, 2020. Photo by REUTERS/Mohamed Azakir.

Apr 26, 2020

Lebanon’s already strained economy has been hit hard by the coronavirus pandemic, prompting the Lebanese government on March 15 to impose a state of general mobilization as part of efforts to contain the outbreak. Hotels, restaurants, and land and seaports have been completely shut down, according to a study prepared by former Finance Minister Georges Corm and published on the Lebanese army website. The study noted that the country’s service sectors are more lucrative than the productive, agricultural and industrial sectors.

According to estimates cited by The Los Angeles Times, the shutdown is costing Lebanon $2.5 billion every month. On April 15, the International Monetary Fund (IMF) said that Lebanon’s real gross domestic product (GDP) had contracted by 6.5% in 2019 and inflation would hit 17% for 2020 versus 2.9% the year before. The IMF also expects Lebanon’s GDP to shrink 12% this year.

Tony Ramy, president of the Syndicate of Owners of Restaurants, Cafes, Night Clubs and Pastries in Lebanon, told Al-Monitor, “Tourism sector revenues stand at about $10 billion a year.” He estimated losses in the sector to be $500 million monthly since Lebanon registered its first case in February.

“Fast-food services constitute only 5% of the operations of the food and beverage businesses,” Ramy said, adding that “785 fast-food businesses have shut down during the period from Sept. 1, 2019, through Feb. 1, 2020, with 25,000 workers having lost their jobs. The coronavirus pandemic has compounded the country’s economic situation with the temporary lockdown.”

Management at Bristol Hotel, which was established in the 1940s in Beirut, issued a memo informing its employees that the hotel is permanently closing given the huge losses. The memo revealed that the pandemic has completely destroyed the hotel sector. The Bristol Hotel had withstood the Lebanese civil war that lasted from 1975 until 1990.

On March 19, all commercial and private flights to and from Beirut-Rafic Hariri International Airport were halted, affecting the aviation sector. Mohamad Abdul El-Hout, chairman of the board of directors and director-general of Middle East Airlines, told Al-Monitor that the “company’s losses due to the virus are estimated at $35 million.”

Of note, this is the first crisis to strike the airlines since the 2006 July war between Israel and Hezbollah, when Beirut’s airport was closed during the high season. According to the Middle East Airlines (MEA) website, the Israeli attack on the airport resulted in losses amounting to $45 million. MEA, however, managed to overcome the crisis and has earned profits exceeding $1 billion in recent years. In light of this fact, Hout said, “We are sticking with our employees, and there is no plan for layoffs.”

People who rely on daily wages, including taxi drivers and bus drivers, have been dealt a severe blow because of the lockdown and the stay at home policy. Employees and schoolteachers have been working remotely, and people are only leaving their houses to buy basic needs. This has affected public transport.

On March 24, a desperate taxi driver in Beirut torched his vehicle when the police fined him for not committing to the policy of one passenger per taxi.

At the end of March, a photo of an unemployed construction worker went viral as he held up a sign offering his kidney for $50,000 because he could not pay rent or provide for his children.

Economy Minister Raoul Nehme told Reuters April 2 that the government has been working on securing a $450 million program with the World Bank to help Lebanon deal with the coronavirus outbreak and support the poor.

In November 2019, a report by the World Bank estimated that poverty in Lebanon could rise from 30% to 50%, and unemployment could also rise sharply if the economic situation worsens.

Human Rights Watch reported April 8 that an inadequate response by the Lebanese government creates the risk of many people going hungry.

Many other sectors have been hard hit by the pandemic, with wedding and birthday parties being canceled and parade groups and event organizers losing their jobs. Clothing shops have shut down.

Naim Berjawi, a news reporter with al-Jadeed TV, told Al-Monitor, “We have had various topics to report on, such as the positive effects of the virus on the environment and the return of 20 species of birds during the lockdown.”

“The purchasing power of journalists, however, has greatly decreased due to the soaring prices [amid the plummeting value of the Lebanese pound],” he added. Berjawi said he encourages people who have small spaces to plant and grow their own vegetables. “I have a YouTube channel called Fijleh (Arabic for "radish") to encourage cultivation on balconies and terraces. The number of viewers has increased since the home quarantine [began],” he said.

A shop owner in Zahle in the Bekaa Valley told Al-Monitor that the price of goods has doubled, which pushed him to increase his prices as well. He said he used to purchase goods from distributors and suppliers with the dollar pegged at 1,500 Lebanese pounds. But today, he is paying 3,000 pounds per dollar in the parallel exchange market, as banks are imposing restrictions on dollar withdrawals. 

A vegetable seller in Hosh el-Omara, 50 kilometers (31 miles) from Beirut, also complained to Al-Monitor about soaring prices, saying he now buys products at higher prices than before, and therefore, he has to sell at higher prices.

A citizen who was buying vegetables told Al-Monitor that suppliers are taking advantage of the situation since the dollar is still officially pegged at 1,515 Lebanese pounds, while it is being traded at 4,000 to the dollar at moneychangers as of April 23.

When asked about prices, the customer told Al-Monitor, “Vegetables are being cultivated in the Bekaa Valley. They are local products and should not be sold at this high price regardless of the coronavirus or the Lebanese pound crisis."

A wholesale candy and chocolate shop owner in Taalabaya in Bekaa Valley in eastern Lebanon told Al-Monitor that many imported commodities are no longer available on the market, and he expects more goods to disappear within two months.

A bakery owner in Jdita, near the town of Chtaura in eastern Lebanon, said, “Sales have declined as people have been cutting their expenses, not to mention the high prices of oil and sugar, which are now double the price.”

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