Lebanon TURMOIL puts economy at RISK OF COLLAPSE with fears US dollar value could DROP

Lebanon has two official currencies: the Lebanese pound and the US dollar.

In the event that Lebanon falls into economic collapse, then it raises the concern that it will affect the value of the dollar, a currency that is widely used globally.

Due to the increase in the country’s economic turmoil, Lebanon has become increasingly dependent upon the dollar, with banks offering higher returns if people change their Lebanese Pounds into Dollars.

After the first elections in over 10 years, held in May, Lebanon’s prime minister-designate Saad Hariri was assigned by President Michel Aoun to form a cabinet.

Over 120 days later and Mr Hariri has still failed to complete this request.

While the time elapsed to form a government so far is not the longest in Lebanon’s history, the longest taking over 300 days, the instability has caused international concern.

The IMF has stated Lebanon needs “an immediate and substantial fiscal adjustment” in order to make its public debt sustainable.

The prime minister has expressed hope and said the “disagreements we see in the government formation will disappear”.

However, after multiple attempts, no government has been formed.

Lebanon’s economy is expected to grow by 1.3 percent in 2018, a decrease from the previous year which saw a 1.8 percent increase.

The country’s fiscal deficit is expected to widen to 9.7 percent and, as a result, the public debt-to-GDP ratio is set to rise to 151 percent from the 148 percent in 2017.

During the Cedre conference in Paris last April, international donors pledged over $11billion (£8.4billion) in loans and grants to aid Lebanon’s ailing infrastructure.

However, due to the lack of a functioning government, authorities have been unable to launch the reforms made by Parliament and to sign off on the economic package.

The prime minister-designate met with President Aoun Wednesday and, according to Mr Hariri, developments were made.

He said: “The atmosphere is positive, God willing, and I am very optimistic.

“I agreed with the president on the need to hasten the formation of the government due to the economic situation.”

However, Lebanese Forces leader Samir Geagea was pessimistic about the possibility of an early government formation.

Mr Geagea said: “According to available information, there are no signs that the government formation is imminent.

“It is essential for the Cabinet to meet similar to the covering of Parliament for maximum economic necessity to take some steps to halt the deterioration rather than reviving the outgoing Cabinet.”