30 Years at a Glance: The Recent Economic History of Lebanon
The current economic situation in Lebanon is – either directly or indirectly – a cumulative result of the previous strategies, policies, and events. Understanding the factors which led to the proposition of the Haircut in Lebanon necessitates looking back at the last 30 years from a financial and economic perspective. Below is the sequence of events leading up to the crisis we are witnessing today.
The Lebanese civil war that lasted from 1975- 1990 utterly damaged Lebanon‘s economic infrastructure. After the war, the Lebanese Government launched a USD 20 billion reconstruction program which aided in:
reducing annual inflation from 1005% to around 5% between 1992 and 1998
increasing foreign currency reserves from 1.4 Billion to 6 Billion
growing the real GDP 8% in 1994, 7% in 1995, 3% in 1997-98 and 1% in 1999; (1996’s results were affected by Israel‘s Operation Grapes of Wrath in April of that year.
Solidere, a 2 billion USD firm, was founded to boost what was called the reconstruction of Beirut’s central district; a lot of ambiguity remains concerning Solidere to date.
Eventually, the stock market reopened, international banks and insurance companies reinvested in Lebanon.
The LBP was pegged to USD since 1997 at a rate of 1507.5 which led to an overvalued currency in relation to Lebanon’s national productivity with reliance on remittances to sustain the economy and the currency.