Complex Made Simple

Is total economic collapse inevitable in Lebanon?

The Lebanese parliament named Najib Miqati as the new Prime Minister. This comes on the eve of a 9 months standoff that saw former PM Saad Hariri declined to form a government in July 2021. Is it too little too late?

Water costs could skyrocket by 200% a month Fuel worth about $300- 400 mn was enough for four months At least half the population has slipped into poverty

The Lebanese parliament named Najib Miqati as the new Prime Minister, a billionaire who served twice before as PM and was accused by a state prosecutor in 2019 of embezzlement.

This comes on the eve of a 9 months standoff that saw former PM Saad Hariri declined to form a government in July 2021.

Is it too little too late?

Plenty of water- none to drink  

In a country known for its abundance of water, more than four million people are at immediate risk of losing access to safe water in Lebanon.

With the rapidly escalating economic crisis, UNICEF estimates that most water pumping will gradually cease across the country in the next weeks.

“The water sector is being squeezed to destruction by the current economic crisis in Lebanon, unable to function due to the dollarized maintenance costs, water loss caused by non-revenue water, the parallel collapse of the power grid and the threat of rising fuel costs,” said Yukie Mokuo, UNICEF Representative in Lebanon.

If the public water supply system collapses, UNICEF estimates that water costs could skyrocket by 200% a month when securing water from alternative or private water suppliers.  

According to a UNICEF-supported assessment based on data collected by the country’s four main public water utility companies in May and June 2021:

  • More than 71% of people fall within ‘highly critical’ and ‘critical’ levels of vulnerability.
  • Nearly 1.7 million people have access to only 35 liters a day, a decrease of almost 80% against the national average of 165 liters pre-2020.
  • Since 2020 there has been an increase of 35% of the prices of private sector bulk water supplies, while the cost of bottled water has doubled.
  • On a national level, water that is unaccounted for due to system losses is about 40%; mostly due to the lack of maintenance and illegal connections.

UNICEF Representative in Lebanon, Yukie Mokuo, said: “Unless urgent action is taken, hospitals, schools and essential public facilities will be unable to function and over 4 million people will be forced to resort to unsafe and costly sources of water, putting children’s health and hygiene at risk.”

UNICEF needs $40 million a year to keep the water flowing to over four million people across the country, by securing the minimum levels of fuel, chlorine, spare parts, and maintenance required to keep critical systems operational, and safeguarding access and operation of the public water systems. 

Fuel oil crisis to ease?

Iraq has signed an agreement allowing the cash-strapped Lebanese government to pay for 1 million tons of heavy fuel oil a year in goods and services, helping Lebanon ease its acute power shortage, the two sides said recently.

Short on foreign reserves and facing a growing shortage of fuel, medicine, and other basic goods, Lebanon suffers from severe power cuts.  

Iraqi Finance Minister Ali Allawi and Lebanese caretaker Energy Minister Raymond Ghajar co-signed the agreement in the presence of Iraqi Prime Minister Mustafa al-Kadhimi.

Ghajar said the fuel worth about $300- 400 mn was enough for four months but could last 1 year if used sparingly, with less severe supply cuts continuing.  

A shortage of foreign currency had made it impossible for Lebanon to secure fuel and other essential goods.

Hospitals said recently that their generators were at risk of running out of fuel, putting critical patients at risk.

Hyperinflation

It’s not inconceivable Lebanon could soon become a “failed state” on a par with Libya or Yemen.

The chronic devaluation of the Lebanese pound, losing about 90% of its value in the past 18 months, is taking a terrible toll on ordinary families.

About 30% of Lebanese children go to bed hungry, the UN says.  At least half the population has slipped into poverty.

Resulting hyperinflation, caused by adverse trading conditions during the pandemic but also by grossly irresponsible financial mismanagement by Lebanon’s politicians and bankers, means subsidies of essential foodstuffs, medicine, and fuel no longer cover their true cost. People with deadly diseases such as diabetes or heart conditions cannot get the help they need.

More than 30% of the workforce is unemployed. Those in work see the value of their wages plummeting. Pensioners’ savings are evaporating.  

The army wants $100 million just to cover the immediate needs of its 80,000 troops. A soldier’s average monthly salary before the crisis was worth the equivalent of $800. Now it’s about $80.  

UN-backed conference hosted by France in Paris on August 4 may be the last chance to save Lebanon from utter disaster.

COVID-19

Lebanon’s deepening economic crisis has piled pressure on hospitals, leaving them ill-equipped to face any new wave of the coronavirus, a top hospital director has warned.

Already struggling with shortages of medicine and an exodus of staff abroad, the country’s health facilities are now also having to contend with almost round-the-clock power cuts.

“All hospitals…are now less prepared than they were during the (COVID-19) wave at the start of the year,” said Firass Abiad, the manager of the largest public hospital in the country battling COVID-19.

“Medical and nursing staff have left, medicine that was once available has run out,” and ever-lengthening cuts to the mains power supply have left hospitals under constant threat.

Meanwhile, after dropping over the spring, COVID cases are on the rise again as Lebanese expats flood home for the summer, and many gather with family and friends.

“It could be catastrophic if this rise in coronavirus numbers leads to a spike-like the one we saw at the start of the year,” Abiad said.