Thread by @husseinch96

🧵 In a matter of two weeks, the value of the Lebanese pound reached around 36,000 LBP against the USD, ⬇️ from 27,000 LBP. Meanwhile, Lebanese policymakers have yet to reach a clear stance on economic reforms that could contain the shock & curtail some of its deep effects. 1/7

2/7 LBP today is at 4% of its 2019 value. As the Lebanese lira loses more of its value, the average price of basic commodities is going to spike, including fuel and electricity subscriptions. This development comes with the emergence of news on hiked telecommunication fees.

https://twitter.com/touchlebanon/status/1529820677099823106

3/7 The troubling bit of such policy failure is that it was a completely avoidable scenario. Had policymakers decided to nip wasteful spending & rent-extraction in the bud back in 2019 (or earlier even), so much of the country’s social fabric could have been spared.

4/7 Today, businesses have lost most if not all productivity. Recent business surveys already point at surging costs, major losses in output-per-worker, and wage-employment crises, causing a dip in reservation wages & triggering a full-fledged social disaster.

5/7 As for local governments? Global trends indicate the residents and communities can count on local administrations for public good provision — such as electricity, water, and some sort of transport infrastructure— in time of crisis. The story could not be more different here.

6/7 The average municipality in Lebanon is broke, owing huge sums of money to the central government. With a tax collection rate well beneath the regional/global average (owed to superannuated laws & a weak public finance system), they are being left to falter & wither away.

7/7 Municipalities in #Lebanon are now at a cross-road. They can either continue to drown in their own debt and arrears, or they decide to actively lobby for their immediate inclusion in the government’s economic recovery package& policy response— whatever those look like.