As Lebanon’s economy drowns in debt, Syria’s begins to sink as well

Over the past two months everyone in Lebanon has become an economist. Walk down the street and you will probably hear snippets of conversation about dollars and exchange rates—and vitriol aimed at bankers. The country is in the third month of a political and economic crisis caused by a drop in remittances and bank deposits that has left everyone short of hard currency. Customers queue in banks for hours only to face arbitrary limits on dollar withdrawals. Credit has dried up, leaving firms unable to finance imports. Though the Lebanese pound is still officially pegged at 1,500 to the dollar, in practice the peg no longer exists: traders charge 2,000 pounds or more.

Now Lebanon’s crisis is rippling across the border into Syria. Their economies have long been linked. Syrian labourers rebuilt Lebanon after its civil war, which ended in 1990. Banks in Beirut were a safe place for wealthy Syrians to park their cash. Since the Syrian conflict began in 2011, businessmen have used Lebanon to skirt sanctions and do deals abroad. But Lebanon is no use as a financial Now Lebanon’s crisis is rippling across the border into Syria. Their economies have long been linked. Syrian labourers rebuilt Lebanon after its civil war, which ended in 1990. Banks in Beirut were a safe place for wealthy Syrians to park their cash. Since the Syrian conflict began in 2011, businessmen have used Lebanon to skirt sanctions and do deals abroad. But Lebanon is no use as a financial hub if its financial sector is frozen. With dollars scarce, the Syrian pound has followed its Lebanese counterpart and crashed to record lows, from 500 to the dollar at the beginning of 2019 to 950 in early December (see chart). hub if its financial sector is frozen. With dollars scarce, the Syrian pound has followed its Lebanese counterpart and crashed to record lows, from 500 to the dollar at the beginning of 2019 to 950 in early December.