Uncontrolled Inflation, What Makes This Country Economically Difficult

Uncontrolled Inflation, What Makes This Country Economically Difficult

In 2020, Lebanon ranks as the fourth country with the highest inflation rate globally at 85.45%. Yes, hyperinflation occurs in a country in the Middle East, along the Mediterranean Sea, bordering Syria to the north and east, as well as Israel to the south.

This rapid hyperinflation has a severe impact on Lebanese society, especially the poor. Imports jumped sharply and food prices increased by 441% since 2019. This hyperinflation affects also the price of clothing, transportation, health and education.

Why Hyperinflation?

Lebanon has been battling severe corruption and an internalized political system for years. It’s quite detrimental to the economy.
At the end of 2019, the Central Bank of Lebanon was faced with a Ponzi scheme as they struggled to keep the lira value afloat. The bank borrows money at an interest rate above the market to repay its debt. As this happens, Lebanese are becoming increasingly frustrated with their government. “They suffer from a poor internet connection, power outages, minimal access to drinking water, and limited health care,” wrote an article in Borgen Magazine.

Is There a Solution?
One possible solution to addressing the economic aid crisis is to distribute donations in dollars. The World Bank notes that this could ease pressure on the lira, ease inflation and help ease the surge in the amount of money in circulation.
However, due to various outside donations, it may not be feasible to allocate US$ 1.3 billion to everyone who needs it and it would be very unfair to those who receive their assistance in lira form. More important is that Lebanon rebuilds its government to regulate aid deals and get the country back on track.

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