The World Bank warned Tuesday that Lebanon's economic and financial crisis ranks among the ten most severe crises, and perhaps among the three worst since the mid-nineteenth century, while criticizing the government's failure to implement any rescue policy amid political paralysis.

Since the summer of 2019, Lebanon has been witnessing an accelerating economic collapse, the worst in the country's history, exacerbated by the horrific explosion of the Beirut Port Aug. 4 and coronavirus-related closures. 

The World Bank said in its report that "this economic and financial crisis is classified among the ten most severe crises, and perhaps one of the three most severe crises, in the world since the middle of the nineteenth century."

"In the face of these tremendous challenges, and in the absence of an executive authority to carry out its full functions, the continuous failure to implement rescue policies threatens the already deteriorating social and economic conditions and fragile social peace" at a time when "there is no clear turning point on the horizon," read the report. 

In light of the economic and financial collapse, in March 2020 the government defaulted on paying its foreign debts, and then began negotiations with the International Monetary Fund over a recovery plan that was later suspended due to disagreements between the Lebanese negotiators.

In less than two years, tens of thousands of people lost their jobs or part of their salaries, and the exchange rate of the lira against the dollar gradually declined until it lost more than 85 percent of its value, sending more than half of the population into poverty and unemployment. 

The international community requires Lebanese authorities to implement urgent reforms in exchange for the necessary financial support to get the country out of the cycle of collapse, but since his nomination in October, Prime Minister-designate Saad Hariri has made little progress on a government formation, despite international pressure led by France in particular.

In parallel, the caretaker government appears unable to take any necessary basic decisions despite the prolonged economic decline. 

- Social unrest -

The World Bank report, titled "Lebanon Plunging: Toward the 3 Worst Global Crises," stated that "the response of the Lebanese authorities to these public policy challenges was largely inadequate."

This is due to several reasons, most notably “the absence of political consensus on effective policy initiatives,” as opposed to “the existence of political consensus on protecting a bankrupt economic system, which has benefited a few numbers for a long time.”

In 2020, real GDP contracted by 20.3 percent, after shrinking by 6.7 percent in 2019. The value of GDP decreased, according to the report, from about $55 billion in 2018 to an estimated $33 billion in 2020.

The report added that "in light of an unprecedented state of uncertainty, real GDP is expected to contract by 9.5 percent in 2021."

Usually, "severe recessions are linked to conflicts or wars," according to the World Bank, which has warned of "the outbreak of social unrest."