COVID-19 Strains Lebanon’s Already Fragile Economy

As the sun begins to set, the young men and women working out of cafe-cum-bars in Gemmeyzye in East Beirut, replace coffee with wine or an aperitif. Many locals, tourists, and expatriates climb down the district’s landmark Saint Nicolas stairs to join their contemporaries and partake in stress-relieving eating, drinking, and mingling. Some of them undulate to Arab and western beats, while others clink glasses and banter, undisturbed by honking cars on the roads that divide the pub-lined streets.

Every evening here resembles festivities.

Until 1990, Beirut was the site of one of the bloodiest civil wars the world had seen but since, it has built an alternative reputation for itself: the party city of the Middle East. Even during the recent uprising in Lebanon, this part of town was buzzing.

Since Lebanon’s government imposed a haphazard quarantine on March 11 to contain the coronavirus (COVID-19), bars and restaurants in Beirut have been deserted.

However, since March 11, as Lebanon’s government imposed a haphazard quarantine to contain the notorious coronavirus (COVID-19), bars and restaurants have been deserted. Edicts taped on the doors of such entertainment outlets, sustaining Lebanon’s tourism industry and providing thousands of jobs, read: “On government’s orders, we will remain shut until further notice.”

Food delivery people are allowed to operate and are now the busiest men in the industry. They whiz past on their motorbikes, racing against time to deliver meals, encumbered with the extraordinary pressure to sustain their businesses.

The declaration of the coronavirus as a pandemic by the World Health Organization (WHO) coincided with the death of a second Lebanese citizen, and 6,000 deaths globally. And while over 160,000 people have been infected across the world, Lebanon is home to 109 of those infected.

Lebanon, already reeling under a severe economic crisis, may turn out to be the worst affected by COVID-19 in the long-run.

A glance at the statistics indicates that among the 119 countries fighting the virus, Lebanon is relatively safe. However, in the longer-run, the country, already reeling under a severe economic crisis, may turn out to be the worst affected.

In addition to shutting down bars and restaurants, Lebanon has also banned flying to or from at least 11 countries including China, Italy, Iran, South Korea, Germany, Spain, and the United Kingdom. It has offered a four-day grace period to Lebanese citizens seeking to return from these countries but no guarantees on when the ban would be lifted. These measures come on top of shuttered schools, universities, parks, clubs and restrictions on large religious gatherings.

Almost all of the first cases in Lebanon were connected to Iran. While the virus emerged in Wuhan, China at the start of the year, it quickly spread abroad. The authorities in the Islamic Republic have been accused of hiding the actual numbers and yet even its own figures confirm that it has at least the third highest infections and deaths. Lebanon’s government came under severe criticism for acting late and maintaining travel links with Iran long after its outbreak was public knowledge.

Critics say that it was a consequence of Lebanon’s deep-links with Iran. Lebanon’s politics is tightly controlled by Hezbollah—an Iran-backed militia and political party, a fact that may have influenced decision-making.

Sami Nader, renowned Lebanese political scientist and economist, said the government “mixed politics with health issues,” but should have cut-off all travel to and from Iran at least a month ago.

Hassan Diab, an engineer and academic installed as the country’s prime minister with the support of Hezbollah and its allies after Lebanon erupted in protests mid-October, rubbished all charges as petty politics.

“The entire world is currently facing this challenge, and the government has not been late in taking any measures aimed at protecting the Lebanese,” Diab said. “Nevertheless, some have resorted to political point-scoring.”

Lockdowns in cities in several countries, cancellation of trade-related conferences and unprecedented travel bans are causing a large dent in the local, regional, and global economy. Lebanon is in a particularly precarious position as it was already on the verge of collapse, facing its worst financial and political crisis since the bloody 15-year-long, civil war.

Experts say while the precautions may be necessary to contain the virus, it would add considerably to the country’s already mammoth economic crisis.

A sectarian political system under which a corrupt ruling elite doles out jobs to loyalists and Ponzi banking schemes are unanimously blamed for Lebanon’s recession. The country has incurred one of the highest debts in the world – 150 percent of its GDP –and manufactures almost nothing, leaving large sections of its population unemployed.

Over the last few months, since the Lebanese uprising, the Lebanese pound has tumbled, losing 40 percent of its value in the market.

Over the last few months, since the Lebanese uprising, the Lebanese pound has tumbled, losing 40 percent of its value in the market. As a result, people are paying much more for basic utilities and thousands of jobs have been lost.

Moreover, banks have imposed capital controls on withdrawals and transfers creating a sense of insecurity culminating into a currency crunch in the country. Lebanon, for the first time, defaulted on its $1.2 billion Eurobond repayment on March 9 to keep the cash within the country.

The Syndicate of Owners of Restaurants, Cafes, Nightclubs, and Patisseries is among the hardest hit. “We [the restaurant industry] have been receiving painful strikes from all sides, and the coronavirus is the final blow to our last hopes,” a statement released by the syndicate said.

Ameen Bashir, a 30-year-old trained audio engineer resorted to working as a bartender because there were no jobs. It pays him $600 a month, half of which he pays towards the rent of his flat. Now, he worries, he may get fired.

“They say we need to keep it shut until March 15, but we don’t know, this country is run by thieves and liars,” Bashir said. “If the owner is not going to earn any money, how is he going to pay us? I may get unemployed because of this virus.”

Fadi Aragi, manager of Meat and Bread, had similar concerns. As he stood outside his once packed restaurant hoping there would be more phone calls for home delivery, he said: “We used to make $2,500 a day but now it’s a fraction of that.” Although he finds it comforting that he is not alone in this. “Everyone has to follow the rules and defeat the virus. Not just us,” Aragi added.

Few Lebanese believe that their government can handle the health or the economic emergency.

But few Lebanese believe that their government can handle either the health or the economic emergency. Lebanon is home to over a million refugees living in stuffed camps where one tent is shared by seven to eight people. If Lebanon’s government fails to contain the virus and it spreads to the camps, a tragedy of colossal size could unfold.

As is, the shortage of dollars has limited the ability of the country to import medical supplies. Lebanon simply does not have the money to equip its hospitals with specialized gear or to build isolation wards.

“In a nutshell, Corona comes at a very bad time for Lebanon,” Nader added. One way to help the economy, he said, was to take financial aid from the International Monetary Fund (IMF), which has become even more urgent with the onset of the coronavirus.

But the Lebanese disagree on an IMF loan and are circumspect of the conditions such help is often dovetailed with.

For now, it appears pretty clear that Lebanon would not be able to repay the next Eurobond due to mature in April, and unless a treatment for the virus is developed (a vaccine will take at least a year), things may get pretty ugly here pretty quickly.