What Went Wrong in Lebanon?
Inside the Shawarma Paradox and its implications for the country.
In this country, the usual way of casually greeting someone is by saying ‘habibi’, which translates to ‘my love’. However, in the past few weeks, the words have changed to “hamdellah ’al salama”, or ‘Thank God for your safety’. Lebanon has been suffering from the malpractices of a corrupt government and with the coronavirus lockdowns, the economy that was already trying to hand by a slight thread has fallen down a deep ravine. And it all exploded a few weeks back.
As in literally exploded.
The cumulating economic and political unrest is very well described by a riddle that is being referred to as the ‘Shawarma Paradox’ on Lebanese social media. It goes somewhat like this:
Before, a shawarma sandwich costed 4,500 Lebanese pounds, that is $3. Now, a shawarma sandwich costs 8,000 Lebanese pounds, that is 90 cents. Has it become cheaper or more expensive?
Even before the explosion, Lebanon was in the midst of one of the worst economic crises in the world. The country is the third most indebted in the world, with an almost 170% debt to GDP ratio. The government hasn’t been making things better in the nation a well. Protestors have called out the corruption rampant in the government which has been criticized for not caring about its people.
There are three main reasons for what went wrong in Lebanon.
The first is the mismanagement in the structure of politics in Lebanon. The brutal Lebanese Civil War from 1975–90 resulted in about 120,000 deaths according to official figures. The result was the formation of a sectarian system of governance.
The government positions are divided among all the religious groups, the President must be a Maronite Christian, the prime minister a Sunni Muslim while the speaker of parliament a Shia. This has created a hierarchical system and a division between the groups, where the leaders only work for the welfare of their sects without the national interest in mind. There has also been a significant rise of the militant group Hezbollah in the Lebanese parliament and it is widely believed that they hold a large amount of power in the administration.
While the ruling class has been trying to profit off their contracts and power, the citizens have been dealing with a worsening economy and daily way of living. There are daily blackouts, prices of food are soaring and half of the 6 million population is below the poverty line.
The second reason is the chaotic banking system, with very rapidly declining foreign reserves. To attract investment, the banks offer high-interest rates, which they are unable to pay, which spirals into a vicious cycle. It accumulates to the rising debt, and this year the Lebanese government defaulted on their foreign debt for the first time in their history. The result is that the value of the Lebanese pound decreased by 80% in the last year and inflation is on the rise. For a country that imports almost all of its food, the price of basic commodities is sky-rocketing.
It made headlines when a minister visited the supermarket and was herself appalled at the prices that were being charged.
The people have lost faith in the banking system. There were reports that banks were holding onto the savings and deposits of citizens not allowing them to withdraw their own owned money. The lending system between the central bank, the government, and the commercial banks is being referred to as a massive Ponzi scheme that is only benefiting the people in power, and crippling the economy.
The third reason is the black market. There are three different exchange rates prevalent in Lebanon. The official exchange rate has been fixed at 1,500 Lebanese pounds for the past 23 years, but with the amount of US dollars scarce in the country and remittances from citizens working in foreign countries, the actual value of the currency has been plummeting over the years. The bank rate at which savings can be converted is 3,850 pounds, which is also said to be just a number displayed to the public. The black market is where the majority of transactions take place and it is 8,700 Lebanese pounds at the moment but expected to be more in the nearing future.
In October 2019, the government announced a tax on using apps like WhatsApp which led to mass protests on the streets that culminated in the vast majority’s frustration with the entire economic situation, and it led to the eventual resignation of the Prime Minister. However, the new government has not been able to take control of the crisis and has been described as weak and incompetent, as unemployment levels fell to over 25%.
And this was before the coronavirus pandemic.
The blast in Beirut has the necessary attention of the world to the crisis in Lebanon which ranked 137th in the Corruption Index out of 180 countries. It’s no wonder the citizens are puzzled over the Shawarma Paradox. After all, for them, 4,500 or 8,000 Lebanese pounds do not have much difference. So it is inconsequential whether the shawarma sandwich is cheaper or more expensive now, as long as systematic changes are not made in the near future.