Lebanon لبنان

Lebanon is a small, highly urbanised country on the eastern Mediterranean with an economy built for decades around banking, trade, tourism, remittances and imports. That model depended on a steady inflow of foreign currency and on a Lebanese pound pegged to the US dollar at a fixed rate that held for more than two decades.

From late 2019 that arrangement gave way. Banks restricted withdrawals and transfers, the pound lost most of its value against the dollar on the parallel market, and prices for imported goods — which is to say most goods — rose faster than wages could follow. The World Bank's national accounts show Lebanon's economy contracting in every year from 2019 onward, including a fall of more than a fifth in 2020, and consumer price inflation peaking above 200% in 2023.

The effects were not evenly distributed. Salaries paid in Lebanese pounds lost purchasing power while salaries and remittances paid in dollars did not. Savings held in Lebanese banks became inaccessible, or were converted at rates far below the market. Households with relatives abroad, or with income in foreign currency, experienced a very different crisis from households without.

MENA Insight treats Lebanon as its founding case study — not because it is representative of the region, but because mechanisms that appeared there in an unusually short space of time recur in different forms across MENA: a currency shock feeding through to prices, public services being replaced by private substitutes, and skilled workers leaving.