Lebanon: End of the Illusion – The Inexorable Collapse of Lebanon

It was a rather harmless beginning, as it so often is in Lebanon. Two-year-old Walid al-Manna was tired, perhaps unsurprising given the summer heat. But just a few hours later, he was no longer eating and was growing increasingly listless.

At midday last Sunday, his parents brought him to a doctor in their neighborhood of Kubba, located in the center of the Lebanese city of Tripoli. Due to the ongoing economic crisis, it was the last medical practice still operating in Kubba. The doctor said the boy’s condition was serious, likely pneumonia, and he had to be taken to the hospital immediately. He also said that he had nothing to give to the boy except for a bit of the pain medication paracetamol.

The boy’s father called the only public hospital in the city, but was told there were no beds available. He then began calling around to all of the some 20 private clinics in the city, but got the same answer everywhere he tried: Sorry, we are no longer accepting patients due to supply shortages. The family then began calling hospitals across northern Lebanon, before expanding their search around the rest of the country. They ensured each hospital that they were able to pay for treatment – but they were unable to find a single one that could help.

Walid was almost completely inert when his father Bilal al-Manna and some of his friends took him to the public hospital at 10 p.m., simply marching through to the intensive care unit. “The doctor really tried to help,” says al-Manna. “He took an X-ray of the lungs and even performed a coronavirus test, which turned up negative.”

Initially, al-Manna was told that the ventilator was defective, and then that there was no oxygen available. At 4 a.m. on Monday morning, Walid al-Manna slipped into a coma. Two hours later, he was declared dead.

Anger Yielding to Fear

Later that day, relatives, friends and neighbors carried the boy to his grave. They stood around the small bundle on the table, wiping the tears from their eyes. The imam quietly recited the funeral prayer, the father gave him a final kiss on the forehead and then the shroud was folded closed. His son would still be alive, said his father, if he had received treatment – if clinics were still accepting patients.

But the little boy’s death did not produce a wave of protests, as similar cases had done in the past. It is as though the anger has yielded to fear – the fear of being dragged into the maelstrom that is accelerating by the day, pulling more and more people into hunger and desperation. It is a maelstrom that has hit Tripoli the hardest, Lebanon’s second-largest city, with an estimated population of 500,000.

It is a quiet tumble into the void. The country is imploding, with hardly any electricity or diesel available and almost no replacement parts for generators. Medical equipment is no longer coming into the country because the importers have gone bankrupt, and there is a lack of medicines.

“In 14 days, we will close everything down except for chemotherapy and a handful of emergency procedures,” says the surgeon Mustafa Allouch, a former member of parliament who is now a spokesman for the city’s private clinics. They are no longer able to pay their suppliers, he says, and the government owes the clinics millions of dollars for the treatment of public officials and soldiers. “We can’t go on.”

For many years, Lebanon was the exception, an oasis of relative calm in a war-torn region. Whereas neighboring Syria plunged into civil war, Lebanon saw the steady growth of a strong middle class after its own civil war ended in 1990. There was a construction boom, and luxury hotels for Gulf tourists contributed to a booming economy. Freedom of opinion and a flourishing cultural life were more prevalent here than elsewhere in the region.

Systemic Collapse

Part of the economic upswing, however, was consistently rooted in the illusion of a strong currency. At the end of 1997, the Lebanese pound was pegged to the U.S. dollar, at a rate of 1 to 1,500. Banks paid up to 10 percent interest rates on deposits and loaned their own capital to the central bank for even higher rates – a situation that led a succession of governments to accumulate one of the highest sovereign debt loads in the world.

The system collapsed in October, and suddenly, there were no more dollars available, at least not at the official rate. What began with a relatively harmless downturn in the exchange rate quickly became an avalanche – and that in a country that imports almost all of its goods. Clothes, food and fuel became more and more expensive, unaffordable for most – a situation that pushed stores and companies into bankruptcy and the people into poverty.

The coronavirus has exacerbated the crisis, even if case numbers in the country are low. But during the three-month lockdown, the hotels and restaurants suffered and Lebanese living abroad were unable to return home – and unable to bring their money with them.

Public schools and hospitals have been largely neglected by the state over the last 30 years, leaving education and medical care up to the free market, which is now pulling those private clinics and schools into bankruptcy. Meanwhile, the Lebanese pound continues to plunge.

When the crisis began, tens of thousands of people across the country took to the streets, demonstrating against the banks and corrupt politicians. The revolution, as they called it, had begun, and it was centered in Tripoli. DJs set their systems up on balconies and the crowds danced in protest – even including young women, which is unusual for the conservative city.

The protesters demanded the installation of a technocrat cabinet, the return of the billions that corrupt politicians had misappropriated and reforms to the country’s election laws. At that time, the pound had already fallen to half of its previous value. Tens of thousands of people gathered in Sahat al-Nour Square in Tripoli, with many camping out in tents. In winter, when the exchange rate continued to fall, the first bank branches went up in flames. Tires were burned in the streets and demonstrators blocked the roads.

A Kind of Ghost Town

Today, the pound is only worth a sixth – on good days, a fifth – of its previous value. Bank deposits, salaries, pensions – they have all shrunk to breadcrumbs. But these days, protests are nowhere to be seen. Citing the need to implement measures to counter the coronavirus spread, the military and state security agencies cleared al-Nour Square a few months ago. Now, even though coronavirus measures were lifted several weeks ago, the square remains empty. Only the barricaded bank entrances, fortified with graffiti-covered steel plates, recall the popular uprising. People seem to have capitulated in the face of the crisis.

Tripoli has essentially become a kind of ghost town. Life continues on the surface, with people out and about and cars on the roads, though fewer than normal. But entire rows of shops are locked up, while in others, shopkeepers sit around for hours waiting for a customer to show up, or they just sit on the sidewalk outside because there is no electricity to light the interiors.

The meat in the last remaining butcher shops is bright pink, as though it has been thawed and refrozen several times, and there are no more bananas available in the city. In front of a mosque in the city center, an imam is trying to sell corona masks that nobody wants to buy. Price tags are changed daily, while in the cafés, elderly men sit for extended periods in front of a single espresso, saying nothing. Nobody is yelling, nobody is protesting any longer. Everyone is doing their best to keep their composure, as though they were extras in their own downfall.

And it’s not just the poor who are struggling. The middle class, in particular, is collapsing, a group that had until recently lived lives similar to their counterparts in Europe. They had an apartment and a car, took annual vacations abroad, and had enough money for meat. Running water, electricity, reliable hospitals, supermarkets and decent schools – all that was a given. Now, though, their savings are melting away like the last spring snow on the peaks of the Anti-Lebanon Mountains.

“Thefts Are On the Rise”

Amer Barudi, a personnel manager who lost his job, and his wife Maya, who earned good money as a yoga instructor, have left Tripoli and are now farming his father’s land outside the city. They are pragmatists more than they are escapists. “We began in February with parsley,” says Barudi, during a walk around this three-hectare (7.4 acre) plot. “Now, we have eggplants, tomatoes, cucumbers, beans, different varieties of peppers and mint.”

They announce their daily harvest via WhatsApp to their 180 regulars, along with the dairy products like yoghurt and cheese they produce with milk from 60 sheep, a few goats and four cows. They could sell more than they are able to produce. Four watchmen keep an eye on the animals at night, because, as Barudi says, “thefts are on the rise.”

The Association of Dentists of Tripoli has organized a protest rally. Yahya Hassan, a doctor and civil rights activist, arrives in a Porsche Cayenne SUV, with others showing up in their BMWs or Mercedes. But don’t let that fool you, Hassan asserts. “Our accounts have been frozen, and we are unable to import anything.” Filling compound has become so expensive that no one can afford treatment. Just getting a single tooth fixed is the equivalent to a worker’s entire monthly salary, so no one is coming.” Banks only provided loans in dollars, and “they are now six times as expensive. We can’t pay them back anyway.”

The dentists have invited a Harvard-educated Lebanese banker to the rally to explain the crisis to them. Nicolas Chikhani rapidly outlines the creation of the bubble that could have been seen if anybody had wanted to. “On what basis could the central bank pay 15-percent interest to the banks? Our government doesn’t produce anything. Technically, the banks, the central bank and the state are bankrupt. Their debts are higher than their assets.”

The astronomical interest rates on bank deposits was the bait everyone was more than happy to swallow. But it was like poison for an already restricted economy because hardly anyone was still investing, with most preferring to collect interest instead.

Left to Their Own Devices

Despite interruptions from power outages, Chikhani speaks about central bank head Riad Salamé, who seemed to conjure up money by magic – money that is now gone. But the details of Salamé’s complicated system of “financial engineering” are too complicated for the audience, even for doctors. When Chikhani finishes, they ask: “Now what about the dollar?” They want to know when the storm will pass – they are looking for a miracle. The economist can only shake his head: “Nothing will stop the collapse of the pound,” he says.

In Beirut, the government’s talks with the International Monetary Fund (IMF) have been suspended without any results. Even after weeks of talks, the Lebanese either could not or would not quantify the individual debt levels of banks, the central bank and the government. The differences in estimates between the two sides are in the double-digit billion range.

Leading the charge in opposing any audit of the government’s finances has been Nabih Berri, speaker of Lebanese parliament and one of the country’s wealthiest politicians, with an alleged $78 million in assets. But without transparency and without reforms, neither the IMF nor the European Union or even the country’s former mandate power, France, will be willing to grant billions to save this corrupt system.

Meanwhile, in Tripoli as elsewhere in the country, people have been left to their own devices. Only a few private soup kitchens are providing for the growing number of needy, but they are having trouble soliciting donations. “We distribute food to neighborhoods we’ve never been to before, where no one has ever gone hungry,” says Fida Hajjeh, the manager of the NGO Sanabel Nour. “There are so many people crowding in front of our distribution site that we have had to call the army at times to contain the crowd. But then the officers demanded bribes from us. Now, we’ve hired security guards.”

Across the country, police are registering a “new form of theft,” an official told the news agency AFP. “It involves baby milk powder, food and medicines.”

Tripoli is home to the two richest men in the country, the Mikati brothers, who together are worth around $4.5 billion. They are keeping a low profile these days and it isn’t even known if they are still in the country.

A Product of Lobbying

Their wealth comes from the country’s most successful mobile phone company, and Najib, the younger of the two, served for years as prime minister. “I have spoken to him several times in recent months,” says a frustrated Mustafa Allouch, the surgeon. “He promised to help, but he isn’t doing anything. Nor are the other superrich. This state just doesn’t work. It never has.”