Lebanon’s Economy Couldn’t Have Imagined a Worse Disaster

Wheat stored at port, which is Lebanon’s main gateway for imports, made up some 85% of its grain supply, and no longer can be used after the explosion

Dafna Maor
Dafna Maor
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The damaged grain silo and a burnt boat at Beirut's harbour following a massive blast that killed more than 100 and injured thousands, August 5, 2020.
The damaged grain silo and a burnt boat at Beirut's harbour following a massive blast that killed more than 100 and injured thousands, August 5, 2020.Credit: AFP

Lebanon couldn’t imagine anything worse happening. Years of wars, political crises, trash piled high as mountains everywhere, an economic crisis, poverty, debt and the threat of bankruptcy, plus the coronavirus crisis this year. But the explosion in the Beirut port Tuesday turned the Lebanese capital into a horrifying disaster scene, with at least 100 dead and thousands injured, and turned the economic crisis into a disaster of historic proportions.

The explosion destroyed much of the port. Its massive impact apparently stemmed from a secondary explosion in a warehouse storing 2,700 tons of ammonium nitrate that had been confiscated from a ship in 2014, but the circumstances still aren’t entirely clear. The explosion destroyed homes and other buildings in and around the port, including a major hospital. Hundreds of thousands of people lost their homes in the disaster, Beirut’s mayor said Wednesday.

The port is Lebanon’s main gateway for imports, accounting for some 70% of the country’s foreign trade. It’s one of the biggest and busiest ports in the eastern Mediterranean. It officially opened in 1887 under the Ottoman regime. It connects markets in Asia, Europe and Africa, and it works with some 300 ports around the world, and receives direct shipments from 56 ports in three continents. In 2018 over 7.05 million tons of goods entered the port, and another 1 million tons left. It had revenues of $313 million that year, a figure that dropped to $200 million in 2019.

A view of the port of Beirut on January 25, 2020 (L) and on August 5, 2020 a day after a blast that killed more than 100 people and wounded thousands.
A view of the port of Beirut on January 25, 2020 (L) and on August 5, 2020 a day after a blast that killed more than 100 people and wounded thousands.Credit: AFP

The wheat stored at the port made up some 85% of Lebanon’s grain supply, and no longer can be used following the explosion, according to Lebanon’s economy minister. Associated Press drone photographs showed that the silos were badly damaged and the wheat had spilled into the wreckage. Lebanon has enough grain storage until it can import more, the minister stated.

Bessma Momani, a professor of political science at Canada’s University of Waterloo, said in a TV interview that Lebanon’s citizens had already reached the boiling point. It’s going to be hard to bring basic goods into Lebanon now, she noted. As it is, consumers are having a hard time managing, she said.

In the meanwhile, Lebanon’s government is calling to prepare Tripoli’s port in the north of the country as an alternative.

After decades of crisis, Lebanon’s economy is collapsing. Decades of corruption and political crises since the end of the civil war undermined Lebanon’s economic growth engines and shook the base of any public trust. The country has faced broad protests against corruption and calling for political change since the fall, but a lack of political functioning meant that Lebanon hasn’t managed even to come to an agreement with the International Monetary Fund on necessary reforms as a condition for help.

An estimated half of Lebanon’s citizens are thought to be living in poverty, a figure that could reach 75% if the price of food spikes and the currency rate falls on the black market. Unemployment is estimated at 40%. The national electricity grid works only a few hours a day. Main shopping streets are deserted.

While Lebanon’s currency is officially fixed to the U.S. dollar, it has fallen 80% in black market trading since October, including a 60% plummet in June alone. The price of food increased 190% in May alone. The Lebanese lira’s collapse has led to hyperinflation, raising the country’s cost of living.

The lira’s collapse, and the lack of dollars, dramatically limited Lebanon’s foreign trade deficit, but in this case it’s not a good thing. Jihad Azour, the International Monetary Fund’s director for the Middle East and Central Asia, has been negotiating with the Lebanese government for two months, after the government declared default on its eurobonds in March. Lebanon has no time to waste when it comes to enacting reforms, Azour said in July. “The acute financial crisis has led to a severe social situation with a level of inflation that is unsustainable,” he said to Voice of America. Lebanon also currently has some 1 million Syrian refugees.

An aerial view shows the massive damage at Beirut port's grain silos and the area around it on August 5, 2020.
An aerial view shows the massive damage at Beirut port's grain silos and the area around it on August 5, 2020.Credit: AFP

Who will help Lebanon? That partially depends on the IMF’s main contributor, the United States, which has conditioned funding on reining in the strength of Hezbollah, which has a representation in Lebanon’s parliament. The Gulf nations, which gave Lebanon money in the past, also fear their funds will reach Hezbollah. France, which has a troubled historical relationship with Lebanon, had said that only the IMF could help the country.

After the blast, France reversed course and offered to help. French President Emmanuel Macron is planning to visit Lebanon Thursday. Millions of dollars for humanitarian aid has been raised around the world.

Lebanese Foreign Minister Nassif Hitti quit Monday to protest government inaction in handling the economic crisis. “The ship will sink,” he said.

Lebanon will now need not only loans to shore up the budget and repay debt, but also aid to buy food for the hungry mouths and shelter for the newly homeless.

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