On July 1st, 2022, the World Bank published its annual GDP per capita report, showing that Lebanon dropped from 5,510 USD to 3,450 USD, ranking the country as a “lower middle-income country” for the first time in 27 years. From 1995 to 2022, Lebanon was ranked as an “upper middle-income country.

LIMS explained that the two main reasons for this drop are the general recession and hyperinflation. Since the data calculated the drop of purchasing power based on an average exchange rate of 2021, the extent of the Lebanese population’s impoverishment is not fully shown in this ranking. The current GDP per capita today is even lower, due to the additional inflation and devaluation that have continued in 2022.

Given those realities, most of Lebanon’s public sector has been on strike, demanding a wage increase to offset their loss of purchasing power. As a result, the strike has put the struggling economy in an even more paralyzing situation. Courts, ministries, municipalities, and other bureaus needed for regular administrative procedures were closed or severely inactive. Imports and exports for instance were heavily affected by the public employees’ strike.  

LIMS warned against any increase in public sector salaries since the government budget is already at a deficit. Furthermore, the government is incapable of borrowing funds from any source due to its default on Eurobonds back in March of 2020. To fund further spending, the only option would be raising money supply. However, in doing so, this would further exacerbate inflation, and devalue the Lebanese pound (LBP). Therefore, any attempt to raise wages without monetary reform will just fuel this vicious circle of inflation-wage increase. 

On the other hand, workers at the central bank joined the strike after a warrant was issued to bring forth the central bank governor. The central bank wasn’t yet affected by the long-term strikes organized by other public sector employees. LIMS explained that the strike held by central bank employees, would not change the exchange rate’s trajectory because it is expected to be short lived. The LBP will remain volatile and maintain its persistent devaluation. LIMS reiterated the importance for Lebanon to switch to a new monetary arrangement that would impose more discipline and restraints on authorities.

LIMS Media Interviews:

• Exclusive – Mardini Explains To Economy Reasons For World Bank’s Downgrade of Lebanon! July 6, 2022: Leb Economy, Article AR
• Expatriate Dollars Entering Lebanon Will Not Lead To Improvement In The LBP’s Exchange Rate, July 6, 2022: Al Jadeed, TV Interview AR
• Has Lebanon Officially Become A Poor Country? July 12, 2022: Lebanon Debate, Article AR
• Are Salary Increases Possible Under The Current Situation? July 13, 2022: MTV, TV Interview AR
• Increasing Judges’ Wages Angers Other Public Sector Employees in Lebanon, July 15, 2022: Independent Arabia, Article AR
• After weeks On Strike, What Does Life Look Like In Crisis-Ridden Lebanon? July 16, 2022: Al Ain, Article AR
• Aoun’s Move Not Innocent… Consequences Of Closing Central Bank Are Severe For Financial And Economic Activity! July 20, 2022: News Folio, Article AR
• Repercussions Of The Central Bank Workers’ Strike On The Monetary File, July 21, 2022: VDL News, Radio Interview AR
• Mardini Reveals To Janoubia The Consequences On The Dollar Due To The Central Bank Workers’ Strike, July 29, 2022: Janoubia, Article AR
• Catastrophic Outcome If Public Sector Salaries Get Corrected From This Source, July 30, 2022: News Folio, Article AR