Is there a way out of the Economic Doldrums?

The objective of this article is to offer some policy recommendations aimed at addressing the urgent near-term economic concerns and the significant challenges facing Lebanon. It also highlights the main elements of a medium-term economic reform program that is needed to lift the country out of the current dire economic situation. The article proposes more of a road map than a blueprint for what needs to be done exactly in each area. At the outset, though, it should be said that there is no easy solution to a very difficult economic situation.

BACKGROUND

Lebanon is now in the throes of a major economic crisis that has been brewing for years. Successive large budget deficits pushed the stock of public debt to a very high level, and since 2011, the overall balance of payments turned into deficits. Financing the twin deficits was complicated by dwindling capital inflows, and the high interest rates needed to maintain the exchange rate peg brought economic activity to a halt.

A simple announcement of a possible tax on WhatsApp calls sparked demonstrations on the streets of Beirut that morphed into a full-fledged revolt across the country, a revolt that it is now