NEW YORK, ALBANY Lebanon has the fourth highest inflation rate in the world, at 85.45 percent, as of 2020. The people of Lebanon, particularly impoverished regions, have been adversely harmed by this rapid hyperinflation. Imports have surged in price as a result, and the cost of food and non-alcoholic beverages has increased by more than 441% since 2019. Clothing, transportation, healthcare, rent, and education have all been affected by inflation.
The Causes and Start of Inflation
For years, Lebanon has struggled with internalized political corruption, which has had a negative impact on its economy. As they fought to keep the lire’s value afloat in late 2019, the Lebanon Central Bank was exposed to a Ponzi scheme; the bank was borrowing money at above-market interest rates to pay back its loans. While this was going on, Lebanese civilians were becoming increasingly irritated with the situation.
their governing body They had poor internet access, power outages, restricted access to potable water, and inadequate healthcare. Citizens began to demonstrate against their government’s economic difficulties, and the Prime Minister attempted to create cash by taxing WhatsApp calls.
The situation was made worse by increased economic constraints resulting from COVID-19-related quarantines and shutdowns in early 2020. Frustration reached a breaking point in August 2020, when an explosion killed at least 200 people and injured 5,000 more in Beirut, Lebanon’s largest city. As a result, the Prime Minister and his government resigned, ushering in a period of political and economic transition. The Lebanese government has struggled to rebuild since then, making it more difficult to process aid and cut inflation.
How the Inflation Rate Effects Humanitarian Aid
Lebanon has had an exchange rate in place in the past to assist manage inflation. Prior to 2020, the Central Bank set a target of 3% annual inflation. However, due to the recent increase in inflation, the official rate for lire conversions is currently 6,240 lire to the dollar, although the transaction costs nearly twice as much on the street. Foreign aid from the United Nations (UN) will be significantly impacted, with a potential loss of $20 million per month, a critical outcome during such a worldwide crisis.
Nearly $500 million has been provided to Lebanon by United Nations agencies and other non-governmental organizations (NGOs). Currently, they are distributing debit cards and vouchers. The Lebanese, on the other hand, only get 6,240 lire per dollar at the present exchange rate. The organizations making the gifts are attempting to persuade the Lebanese government to process the donations at the informal rate, which would provide Lebanese citizens 14,000 lire every dollar. The Central Bank of Lebanon, on the other hand, has been resisting this request. The World Bank agrees, stating that if this proposal is granted, it will exacerbate already-high inflation, further harming impoverished areas.
Possible Solutions
The distribution of gifts in dollars has been suggested as one possible solution to the economic aid dilemma. According to the World Bank, this can serve to relieve stress on the lire, lower inflation, and reduce the money supply increase. However, due to numerous outsources of donations, it may not be possible to provide $1.3 billion to all persons in need, which would be particularly unfair to those who receive relief in lire. What’s more important is that Lebanon re-establishes its government so that aid transactions may be regulated and the country can get back on track.
Why was there inflation in Lebanon?
Inflation in Lebanon has soared in recent years as the country’s financial and economic crisis has spiraled out of control, with governments doing nothing to offset the effects. The currency has lost approximately 90% of its value, putting three-quarters of the population in poverty.
Is there inflation in Lebanon?
More specifically, by September 2021, the average inflation rate had risen to 132.98 percent, compared to 66.13 percent in the first nine months of 2020. As a result, across the study period, all sub-components of Lebanon’s consumer price index (CPI) grew.
What is Lebanon’s financial crisis?
BEIRUT, LEBANON, JANUARY 12, 2022 Save the Children said today that the collapse of the Lebanese pound to unprecedented lows this week will push even more children into poverty and hunger this year.
Since the beginning of 2022, the Lebanese pound has lost almost 15% of its value, forcing desperate households already struggling to buy food, electricity, and petrol even farther into poverty, with a tank of gas for a tiny car now costing more than a month’s income on minimum wage.
Lebanon’s currency has lost more than 90% of its value since 2019. In the previous two years, the country’s economic collapse has forced an estimated four million households into poverty, making it one of the worst in the world since the 1850s. Many children are consuming less than they have in the past, exacerbating the country’s persistent hunger crisis.
Save the Children is urging the Lebanese government and relevant stakeholders to take immediate steps to stabilize the economy in order to protect children and their families from additional suffering.
* * * * * * “The situation in Lebanon is fast deteriorating as the country grapples with several crises with no signs of relief in sight. As the value of the Lebanese pound continues to fall, the cost of food, fuel, and medicine is rising at an alarming rate. A single tank of gas for a tiny automobile now costs more than a month’s minimum wage wages.
“Every day, the children and families with whom we serve tell us about the difficult decisions they must make between food and rent, electricity and medication, and sending their children to school. This will have a disastrous effect on Lebanese and refugee children throughout the country, putting even more basic requirements out of reach and pushing them to make more difficult decisions.
* * * * * * “For children and their families in Lebanon, 2022 appears to be another long and difficult year. We can’t just sit there and let Lebanon’s financial disaster unfold. Before it’s too late, the Lebanese government and the international community must work together to protect children’s futures.” *
What caused the Lebanese currency to depreciate?
For 22 years, the Lebanese currency was tied to the dollar at 1,500 pounds per dollar, until decades of corruption and incompetence culminated in the country’s greatest economic crisis in modern history, which began in October 2019.
A political crisis over the inquiry into the major port explosion in Beirut’s port in August 2020 exacerbated the currency meltdown. Since Oct. 12, the administration has conducted no meetings, despite calls from some organizations, including terrorist Hezbollah, to dismiss the judge overseeing the probe, claiming he is biased and political.
Lebanon’s economic collapse has been dubbed “one of the worst in the world since the 1850s” by the World Bank.
Several people in Lebanon are paid in pounds, which prevents them from purchasing many essential items. The little country of 6 million people imports 80% of its goods, including a million Syrian refugees.
According to the United Nations, more than three quarters of Lebanon’s population lives in poverty.
Last month, Prime Minister Najib Mikati stated that a draft agreement with the International Monetary Fund will be finalized by the end of February.
What causes price increases?
- Inflation is the rate at which the price of goods and services in a given economy rises.
- Inflation occurs when prices rise as manufacturing expenses, such as raw materials and wages, rise.
- Inflation can result from an increase in demand for products and services, as people are ready to pay more for them.
- Some businesses benefit from inflation if they are able to charge higher prices for their products as a result of increased demand.
In 2021, which country will have the highest inflation rate?
Japan has the lowest inflation rate of the major developed and emerging economies in November 2021, at 0.6 percent (compared to the same month of the previous year). On the other end of the scale, Brazil had the highest inflation rate in the same month, at 10.06 percent.
What is Lebanon’s inflation rate in 2021?
BEIRUT (AP) According to the monthly Consumer Price Index published by the Central Administration of Statistics, a record year-over-year high inflation rate of 224.39 percent was registered in December 2021.
- The CPI reported a 16.52 percent increase in inflation in December compared to the previous month. Inflation in Lebanon increased throughout 2021, particularly in the second half of the year, as the Banque du Liban gradually reduced subsidies on vital goods, most notably petrol, in the aftermath of the country’s social and economic challenges.
- Transportation prices increased by 522.39 percent year over year, a minor decline from November’s 579.9 percent gain. Food and non-alcoholic beverages saw a 438.65% year-over-year increase. 425.35 percent increase in water, electricity, gas, and other fuels. The cost of eating out and staying in a hotel has climbed by 414.71 percent. The expense of health care has increased by 404.94 percent. Alcoholic beverages and tobacco, as well as furnishings, household equipment, and basic household maintenance, as well as apparel and footwear, experienced lower annual inflation rates of 295.2 percent, 243.73 percent, and 233.75 percent, respectively.
- Water, electricity, gas, and other fuel prices increased the most, by 44.84 percent, followed by transportation costs, which increased by 31.84 percent, restaurant and hotel charges, which increased by 20.68 percent, and food and non-alcoholic beverage prices, which increased by 19.14 percent. Meanwhile, the cost of alcoholic beverages and cigarettes increased by 19.4 percent in November, while the cost of furniture, domestic equipment, and routine household maintenance increased by 12.34 percent, and health costs increased by 6.53 percent.
- Education had the lowest rate of inflation, with annual and monthly increases of 35.04 percent and 0%, respectively. Telecommunications saw comparable increases, with a 36.17 percent yearly increase and a 0.9 percent monthly increase.
- South Lebanon had the highest monthly inflation rate of 21.31 percent, followed by 18.63 percent in the Bekaa, 17.67 percent in Mount Lebanon, 14.96 percent in Nabatieh, and 10.07 percent in Beirut. South Lebanon had the largest transportation price increase of 49.6%, whereas Nabatieh only saw a 16.77 percent increase in the same category.
What is the main source of revenue for Lebanon?
The Lebanese government relies heavily on tax receipts, the most major of which being domestic taxes on goods and services and income tax.
Is there oil in Lebanon?
Oil dominates energy in Lebanon, accounting for more than 95 percent of primary energy use in 2017. The vast majority of the country’s energy is imported. Lebanon’s energy market is characterized by rapidly expanding consumption and frequent shortages due to deteriorated infrastructure, which was partially devastated by the civil war that ravaged the country between 1975 and 1990.