A World Bank report said deliberately inadequate policy responses by Lebanese governments, combined with self-serving agreements by politicians, are to blame for the country’s economic crisis. The report concludes that the country needs to “seriously engage in the macro-financial, financial and sector reforms that the World Bank has been pushing for decades.”
Politicians defending ‘bankrupt economic system’
In its latest report on the economic situation in Lebanon, the World Bank has claimed that the Middle East country’s ongoing economic crisis is the product of “deliberately inadequate policy responses” by successive governments. The report, which analyzes Lebanon’s post-civil war economy, cites the failure of global lender politicians to agree on effective policy measures, one of the most severe economic crises “since the mid-1800s”. Is.
The bank argues that the absence of effective policy responses combined with “political consensus in defense of the insolvent economic order” has added to the misery for the people of Lebanon.
In a report dubbed the Lebanese Ponzi Finance Review, the World Bank acknowledged the role of the COVID-19 pandemic in worsening the situation. However, the bank says that Lebanon’s problems have more to do with past decisions made by the country’s politicians. To support this claim, the report points to the mismanagement of people’s savings. The report states:
Most painfully, a significant part of people’s savings is in the form of deposits [the] Commercial banks have been misused and misused in the last 30 years.
Lebanon’s Savings Losses
As previously reported by Bitcoin.com News in February, a financial reform plan launched by the Lebanese government at the time would cost Lebanese depositors $38 billion. However, the same plan would result in a combined loss of $31 billion for the government, shareholders of banks and the central bank, which is about $7 billion less than the proposed loss for depositors.
Nevertheless, in its report, the World Bank argues that commercial banks and large creditors should have absorbed the losses.
“The loss should have been acknowledged by bank shareholders and large creditors, who have made substantial profits over the past 30 years from a very uneven economic model. It should have been at the beginning of the crisis. [over 2 years ago] To limit the economic and social pain of the financial crisis,” the report said.
Expanding on Lebanon’s so-called “deliberate depression”, the report claims that the actions of successive governments proved that the country had “relentlessly and swiftly departed from orderly and disciplined fiscal policy.” This allowed to create the illusion of wealth by the accumulation of Lebanese debt “in order to maintain deposit flows under a fixed exchange rate, the overvaluation of which allowed excessive consumption.” It can be used as a “distribution channel for subsidies and transfers to further strengthen the power-sharing acknowledgment system”.
In concluding its message directed to the people of Lebanon, the World Bank said that citizens need to be aware of how years of mismanagement had plunged Lebanon into its current crisis. The global lender said this background will help the Lebanese people understand why the country needs to “seriously engage in the macro-financial, financial and sector reforms the World Bank has been pushing for decades.”
When this is done earlier the Lebanese can reduce the “painful cost of Ponzi finance”.
What are your thoughts on this story? Tell us what you think in the comment section below.
image credit: Shutterstock, Pixabay, WikiCommons, Editorial Photo Credit: Erich Kernberger/Shutterstock.com
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation or recommendation or endorsement of an offer to buy or sell any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the Company nor the author is responsible, directly or indirectly, for any damage or loss alleged to be caused by or in connection with the use or reliance on any materials, goods or services mentioned in this article.