By Gavin Gibbon
Country's financial crisis has now become a humanitarian crisis that the world can't ignore, says Scott Livermore
A leading economist has emphasised how important it is that the international community comes to the aid of Lebanon following the devastating blasts that rocked the port area of Beirut on Tuesday night.
Scott Livermore, ICAEW economic advisor and chief economist at Oxford Economics, told Arabian Business on Wednesday: “Lebanon can not recover on its own.”
The double explosion appeared to have been caused by a fire igniting 2,750 tonnes of ammonium nitrate left unsecured in a warehouse.
It has left 300,000 people homeless and caused damage across half of the city estimated to cost between $3 billion and $5bn, according to the stricken city’s governor Marwan Aboud.
The government has announced that the port in Tripoli, which is currently operating at 40 percent of its capacity, will serve as Lebanon’s main shipping centre.
However, Livermore cautioned: “In the near-term, Lebanon will likely face even greater shortages (food etc, as about 70-80 percent is imported), with prices soaring. the need to secure wheat/grain supplies is particularly acute. And inflation already stood at 90 percent as the currency continues to lose value in the black market.”
Lebanon has enough wheat stockpile to last for a month-and-a-half and isn’t expected to face a crisis, Al Akhbar reported.
However, the challenges to rebuild the Lebanese capital, which has been at the centre of several conflicts in recent years, are far greater than potential food shortage.
Livermore said: “The damage to the buildings, shops, offices, retail and residential parts of the city are material. Clearing debris, finding enough material for rebuilding will be a challenge given lack of port. But cost likely to run in billions. However, this is against the backdrop of a defaulted state with a double-digit government budget deficit and an insolvent central bank and banking sector.”
Even before the disaster at Beirut Port, experts were forecasting a deep economic slump this year, with the economy shrinking by around 15 percent, in the midst of the dire economic woes of the country, compounded by the Covid-19 crisis.
Lebanon missed its third Eurobond principal repayment due on June 19, along with several interest payments on Eurobonds due since March.
A statement from S&P Ratings last month said: “Lebanon's currency peg to the US dollar is faltering, with ongoing foreign exchange shortages and a widening gap in the parallel exchange markets. A restructuring program is likely to be accompanied by an official currency devaluation.”
In light of the humanitarian crisis that has unfolded in Beirut in the last 24 hours, Livermore believes it is more important than ever for countries to help Lebanon.
He said: “Recovery cannot be achieved without international support. Geopolitical tensions made it difficult to organise support when Lebanon was ‘just’ facing a financial crisis but these issues become less important in dealing with a humanitarian crisis. There have been pledges of humanitarian support from friendly nations: France, Jordan, Tunisia, Russia, Qatar, Iraq have so far all announced plans to help and I’m sure others will follow.
“The key question is whether this translates into support that can help Lebanon tread a path to recovery.”