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Lebanon's economy was already in crisis. Then the explosion happened in Beirut

2020-08-07T09:31:44.316Z


This week's big bang in Beirut, which also swept large swaths of the city and displaced 300,000 people, couldn't come at a worse time. The economic situation in Lebanon ...


Beirut explosion: previous tragedies in Lebanon 1:03

London (CNN Business) - The cataclysmic explosion in Beirut, the capital of Lebanon, is aimed at sending an economy that was already mired in crisis into unknown danger.

On Tuesday, a huge explosion at the city's port left at least 135 people dead and 5,000 wounded. The death toll is expected to increase as search and rescue efforts continue.

The blast, which also devastated large swaths of Beirut and displaced 300,000 people, could not come at a worse time.

The bride who survived the Beirut explosion speaks 3:00

In the past year, a collapse in the country's banking system and skyrocketing inflation sparked massive protests. Even before the covid-19 pandemic hit, the World Bank projected that 45% of people in Lebanon would be below the poverty line in 2020.

"It is an economic crisis, a financial crisis, a political crisis, a health crisis and now this horrible explosion," said Tamara Alrifai, spokesperson for the United Nations Relief and Works Agency for Palestine Refugees in the Near East.

European and Gulf countries have sent assistance to help Lebanon manage the aftermath of the explosion, and the country's central bank has ordered banks and others to make interest-free dollar loans to be paid over the next five years so that people and companies can use in rebuilding. But that is expected to be well below what the country needs, and some donors may be deterred by widespread corruption and mismanagement.

France's President Emmanuel Macron, who was surrounded by an angry crowd during a visit to the devastated neighborhoods of Beirut on Thursday, said France would provide medicine and food, but not through corrupt officials.

"This aid, I guarantee, will not end in corrupt hands," he told Lebanese protesters, according to a spokesman.

Macron later told reporters that France would help organize an international conference to raise funds for Lebanon. He promised "a clear and transparent mandate, whether French or international" to ensure that the money "is provided directly to the local population, NGOs and on-site teams in need."

Before the explosion, the economy was already in free fall

The economic situation in Lebanon was bleak before the explosion.

The International Monetary Fund last predicted that Lebanon's economy, beset by rising food prices, the collapse of its currency and covid-19, would contract by 12% this year. That's much worse than the 4.7% average drop in the forecast for the Middle East and Central Asia.

The motives behind the new protests in Lebanon 0:33

The country defaulted on part of its debt in March. And last week, Moody's downgraded Lebanon's credit rating to its lowest range. It is now on par with Venezuela.

"The country is in the midst of an economic, financial and social crisis, which very weak institutions ... seem unable to address," Moody's said in a statement. The currency collapse and the related increase in inflation create a "highly unstable environment," he continued.

Lebanon had been seeking a $ 10 billion loan from the IMF, but talks stalled last month.

On Thursday, IMF chief Kristalina Georgieva called for "national unity" to deal with the country's deep crisis and said the agency is "exploring all possible ways to support the people of Lebanon."

"It is essential to overcome the impasse in the discussions on critical reforms and to launch a significant program to change the economy and generate responsibility and confidence in the future of the country," he added.

The explosion in Beirut, which has been declared a "disaster city", will only put more pressure on the economy.

"There is not an apartment in Beirut that has not been affected, nor a [business] that has not been affected, be it the showcase [or] the goods," Lebanon's Economy Minister Raoul Nehme said on Wednesday, to CNBC Arabia.

The port where the explosion occurred is the nation's main maritime center and 60% of the country's imports cross through it. Nehme said it has been "practically erased."

Tourism accounted for almost a fifth of Lebanon's GDP in 2018, when two million people visited the country. That sector has suffered another great blow.

"It is a disaster for Lebanon," said Pierre Achkar, head of the Federation of Hotels for Tourism. He said occupancy rates in hotels still open had already fallen to 5% and 15% due to the coronavirus and political problems.

Achkar told the state news agency NNA on Wednesday that the blast damaged 90% of hotels in Beirut.

Chris Liakos, Nada AlThaher, Schams Elwazer, Barbara Wojazer, and Sharon Braithwaite contributed to this article.

Beirut explosion

Source: cnnespanol

All news articles on 2020-08-07

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