Its economic woes began long before this latest catastrophe, however. As far back as last October hundreds of thousands of Lebanese citizens faced with regular electricity blackouts and 25pc unemployment took to the streets, in protest against a political system based on religious sects formed after the end of the civil war in 1990. Lebanon’s culture of bribery, embezzlement and nepotism has put it among the world’s most corrupt countries, according to Transparency International. According to the World Bank, nearly half the population are now living in poverty.
Years of living on the never-never finally came home to roost in March when prime minister Hassan Diab defaulted on the country’s debts for the first time. Talks with the International Monetary Fund over a bail-out of up to $10bn – equivalent to around 20pc of its economy – have stalled and only this week the foreign minister Nassif Hitti resigned, warning that Lebanon was in danger of becoming a “failed state”.
For years the heavily import-dependent economy has run huge current account deficits of more than 20pc, funded by a diaspora of citizens living abroad sending dollars home to help pay its way. They were tempted by double-digit returns from Lebanese banks in a low-rate world and the cash was recycled to help fund the deficit, but in recent times the money has been drying up. The oil price shock also cost jobs across the region and hit dollar inflows, heaping more pressure on the national balance sheet – and then came Covid-19.
Oxford Economics specialist Maya Senussi says: “The loss of confidence didn’t happen overnight, it progressively deepened on all fronts, both domestically and among the diaspora and donors as people lost faith in the government’s ability to implement reform, became more anxious about the outlook for the economy and jobs, became more angry about the corrupt practices and eventually lost faith in the safety of their savings.”