The economic situation in Lebanon and Egypt has been deteriorating in recent years, with both countries facing a severe shortage of foreign currency, a soaring black market exchange rate, and mounting external debt. While the causes of the crisis may differ, the consequences are equally dire for the people and the stability of the region.
One of the main challenges that Lebanon and Egypt share is the scarcity of dollars, which are essential for importing goods, paying debts, and attracting investments. Both countries have witnessed a widening gap between the official and the parallel exchange rates, creating inflation, speculation, and social unrest.
In Lebanon, the pound has lost more than 90% of its value since 2019, reaching a record low of 89,000 pounds to the dollar in the black market, while the official rate remains at 15,000 pounds to the dollar. The Lebanese banks have imposed strict limits on withdrawals and transfers, trapping the deposits of millions of customers and depriving them of their savings.
In Egypt, the pound has also depreciated significantly, reaching over 60 pounds to the dollar in the black market, while the official rate is around 31 pounds to the dollar. The Egyptian banks have also imposed restrictions on the use of electronic cards and foreign currency transactions, hampering the business activity and the purchasing power of the citizens.
The Debt Burden
Another common challenge that Lebanon and Egypt face is the high level of external debt, which poses a threat to their fiscal sustainability and their ability to meet their obligations. Both countries have accumulated large debts over the years, mainly due to chronic budget deficits, low economic growth, and political instability.
Lebanon has one of the highest debt-to-GDP ratios in the world, reaching 170% in 2020. The country defaulted on its debt for the first time in its history in March 2020, when it failed to pay a $1.2 billion Eurobond due. Since then, Lebanon has been unable to reach an agreement with its creditors or secure a bailout from the International Monetary Fund (IMF), due to the lack of political consensus and reforms.
Egypt has also seen its debt-to-GDP ratio increase, reaching 90% in 2020. The country has to repay around $42.3 billion in 2021, which is the largest external debt due in a single year in its history. Egypt has been relying on loans from the IMF, the World Bank, and other sources to finance its budget and balance of payments gaps, but these loans come with conditions and obligations that may be difficult to fulfill.
The Reform Imperative
The only way out of the economic crisis for both Lebanon and Egypt is to implement comprehensive and credible reforms that can restore confidence, stability, and growth. However, this requires political will, social consensus, and external support, which are not easy to achieve in the current context.
Lebanon has been suffering from a prolonged political deadlock, a dysfunctional governance system, and a deep social divide. The country has been without a fully empowered government since August 2020, when the previous cabinet resigned following the devastating Beirut port explosion. The political parties have been unable to agree on a new cabinet that can implement the necessary reforms and unlock the international aid that Lebanon desperately needs.
Egypt has been facing a different set of challenges, such as human rights violations, security threats, and regional tensions. The country has been under the tight grip of President Abdel Fattah el-Sisi, who has cracked down on any form of dissent or opposition. The country has also been involved in several conflicts and disputes in the region, such as the Nile dam issue with Ethiopia, the Libyan civil war, and the recent escalation with Israel and Gaza.
The Regional Implications
The economic crisis in Lebanon and Egypt has not only domestic but also regional implications, as both countries play an important role in the Middle East and North Africa. The stability and prosperity of Lebanon and Egypt are vital for the security and development of the region and the world.
Lebanon is a small but diverse and influential country, with a strategic location, a vibrant culture, and a resilient people. Lebanon hosts the largest number of refugees per capita in the world, mainly from Syria and Palestine. Lebanon is also a key partner for the international community in countering terrorism, promoting dialogue, and preserving diversity in the region.
Egypt is a large and powerful country, with a rich history, a huge population, and a pivotal role. Egypt controls the Suez Canal, which is one of the most important waterways for global trade and navigation. Egypt is also a major actor in the Arab and Islamic world, as well as a mediator and a peace broker in several regional conflicts and issues.
Therefore, it is in the interest of the international community to support Lebanon and Egypt in overcoming their economic challenges and achieving their potential. This support should be based on mutual respect, cooperation, and solidarity, and should aim at addressing the root causes of the crisis, not just the symptoms.
