There used to be a middle class in Lebanon, but now the rich are rich, the middle class has become poor and the poor have become destitute.
Lebanon’s current economic catastrophe is epitomised by one factor more than any other: The free fall of its currency. Since 1997, the Lebanese Central Bank has artificially pegged to the lira was to the US dollar at the rate of $1 = 1,500LP.
The Central Bank managed this by borrowing from private banks, who instead depended on depositors attracted by its huge interest rates (up to 14 per cent). Despite its multiple socio-political, economic and security challenges, the Lebanese economy managed to strut along primarily due to the stability provided to its financial system by the dollar peg, but since September, the lira has lost 85 to 90 per cent of its value - to the extent that the exchange rate on the streets is 12,000 to 12,500 lira to the dollar.
What does this mean? Say you salary was $500 a month. You could expect to be paid 750,000LP or $500 and it would be the same. But now, you are paid 750,000LP, and that is the equivalent of $75. In other words, you cannot buy goods or services worth $500 with 750,000LP. For instance, thanks to the collapse in currency, red meat, which was about $9 a kilo before the collapse, is now more than $42 a kilo. Red meat has become such a luxury that even the army cannot afford it on its anymore and has struck it off the menu for soldiers.
Those who saved their money in lira in the banks have seen a lifetime’s savings simply wiped out. Even those who were smart enough to keep their savings in dollar accounts now cannot access their precious dollars. Simply because there aren’t enough dollars in the Lebanese financial system. Banks have imposed severe restrictions on how much you can withdraw from your own bank account; usually, it is about $200 a week. Even Lebanese expats who want to send money in dollars to family and friends in Lebanon cannot do so as the dollars are being confiscated by banks and money exchanges.
No credit cards, please
To add to the disastrous situation, small and large businesses are refusing to accept credit card transactions from customers, fearing that the banks will not honour the transactions.
The dearth of dollars has meant that Lebanon, a country that imports more than 80 per cent of its daily needs, can suddenly not afford to do so, leading to severe shortages in supermarkets.
Hyperinflation has set in, and the buying power has almost vanished.
What economy?
As the financial crisis reaches the abyss, many Lebanese have resorted to the ancient barter system, especially on Facebook groups. Gym equipment is being exchanged for canned food; car spare parts for baby milk formula. There is every sign that Lebanon heading for a Zimbabwe or Venezuela-style collapse. And this comes at a time when it also has to deal with COVID-19.
Where crypto comes in?
A visit to any Lebanese community be it Reddit or Facebook groups, you'd find at least one person a day asking how to buy bitcoin, now bitcoin would be a terrible coin for the majority of the people because of it's transaction fees, but the intent of a lot of people is in the right place, they need an alternative. With enough guidance and direction, Lebanon could see a mass BCH adoption, It technically has all the capabilities to fix some of the biggest problems facing the people today.
in Serbia is the same