Lebanon continues to grapple with hyperinflation on top of the government fallout following two explosions on 4 August that killed more than 200 and injured over 5,000 people.
Data released by the official Central Administration of Statistics on Wednesday, 26 August, revealed consumer prices to have soared 112.4% in July. A breakdown shows that clothing and footwear were nearly 409% more expensive while prices at restaurants and hotels rose by almost 473%.
“Lebanon’s currency and its associated hyperinflation are at the centre of Lebanon’s economic crisis,” said Steve Hanke, a Professor of Applied Economics at Johns Hopkins University in Baltimore (USA) and an expert on measuring hyperinflation.
In early July, Lebanon became the first country in the Middle East and North Africa region to reach hyperinflation, its inflation rate having exceeded 50% for 30 consecutive days.
“To have any hope of fixing Lebanon’s multiple problems, one must first extinguish the currency crisis and smash hyperinflation,” Hanke told MPC Journal staff. “That would establish stability and give whatever authority introduced to the currency board the credibility required to face Lebanon’s many other problems.”
The value of the national currency has fallen by 85% and shows few signs of slowing down. In June, demonstrators took to the streets when the Lebanese lira had sunk to 70% of what it was in October 2019 when protests initially sprouted.
There are three different exchange rates for the Lebanese lira (LBP), officially set at 1,500 LBP per USD. The bank has its own rate at 3,000 LBP and the black market rate hovers at 7,000 LBP to the US dollar.
On 3 August, just a day before the huge fatal explosions in Beirut’s port, Foreign Minister Nassif Hitti resigned, saying he felt Lebanon was fast becoming a “failed state.” He wrote in his resignation letter, “If they don’t come together around the interests of the Lebanese people and save them, then the ship, God forbid, will sink with everyone on board.”
The UN Economic and Social Commission for Western Asia (ESCWA) estimates that more than 55% of the country’s population lives in poverty with limited access to basic needs. This is almost twice the figure of 28% registered one year ago.