Financial system of Livan: crisis of liquidity, protests against establishment, default

Abstract

The beginning of March 2020 in Lebanon was marked by the Government’s refusal to pay their debts of $1.2 billion, that is, the country defaulted. The prerequisites to it were a certain political instability, incompetent actions of the Government and the Central Bank in the financial sector. Lebanon is not the only country in the world which defaulted, and it is not the only Mediterranean country having a huge state debt of 150–160% of GDP. At the same time, despite the present situation, during quite a long period of time, households did not have savings due to the constant increase in prices for consumer goods, utility payments and the fall of levels of remuneration.The default revealed not only economic, but also political problems in the country. Over the last 6–8 months in Lebanon there happened mass street protests against sharp decrease in standard of living and the political elite’s lack of action. Not main, but quite big cash flows, including cash transfers of the Lebanese working abroad and financial aid from the Persian Gulf countries, which supported the economy for many years, started to decrease sharply. The recession has become a certain catalyst in order to bring hundreds of thousands of Lebanese people to the streets in October 2019.The Government had to resign, but the new PM, who had come to power in January 2020, did not manage to prevent the recession and restore political stability in the country.