This week, I am going to tell you a story that you may already know. That of Lebanon, a country that was once known as the Switzerland of the Middle East. Its capital, Beirut, was the commercial hub of the region.

The country, as you know, is in a sorry state today. Its debt has reached 150% of national output and is one of the highest burdens in the world. The central bank, Banque du Liban, introduced some short term, dangerous measures like “financial engineering” to attract dollars and be able to pay for the government’s extravagant lifestyle. Some economists have described this financial system as “a nationally regulated Ponzi scheme, where new money is borrowed to pay existing creditors. It works until fresh money runs out.”¹

And low and behold: today, “the budget deficit rocketed and the balance of payments sank deeper into the red, as transfers failed to match imports of everything from staple foods to flashy cars.” Foreign exchange inflows “dried up and dollars exited Lebanon. Banks no longer had enough dollars to pay depositors queuing outside, so they shut their doors.” ² The Lebanese Lira went from 1,500 to 8,000 to the dollar. It is estimated that today, more than half of the population is living below the poverty line. Unemployment hovers around 25% and inflation is in the triple digits, making it impossible for a large swathe of the population to purchase even the basic necessities.

You know all this, don’t you? What you probably don’t know is how close we are to reaching that same sorry state. Right now, our GDP per capita has gone down from $11,058 in 2019 to $ 8,784 in 2021. Our miserly rupee has plummeted from Rs31 to the US dollar in December 2014 to over Rs43 today. Our debt hovers around 100% of GDP and a trip to the supermarket tells a whole story about the rate of inflation here. But the figures are being massaged through some creative accounting and the complicity of institutions that were once fiercely independent and have now fallen into disrepute. So our public sector debt is made that much less scary by not including an Rs8.2 billion Special Drawing Rights from the International Monetary Fund and is further embellished by a Rs25 billion ‘investment’ into Airports Holding Ltd that finds its way to relieving government debt. Our official inflation rate is kept at 7.4% (even that is high). As an economist put it in one of his posts: “If the official rate is that high, it means that unofficially, nou déjà dan bez.” (We are already in trouble)

The least you would expect a responsible government to do is send a clear message that we don’t want to go the Lebanon, Greece or Zimbabwe way; that we need to cut down on our spending, stop borrowing and live according to our means. No, perish the thought! Government spending is going on unabashed. Prestige projects are being announced one after the other, borrowing more and more both locally and overseas in hard currency. The tramway extension is going ahead. Côte d’Or is going to have a couple more white elephants and many of our ‘honourable’ members are tripping over themselves to acquire new cars bought in hard currency we are not earning enough of! Many of them have already filled their pockets to the brim through shady deals.

While we watch this in mixed disgust and detachment, we should never lose sight of Lebanon. There is now a consensus that the country was derailed by corruption and mismanagement of public funds as politicians borrowed and spent without restraint. The immediate result was that everything took an irreversible nosedive. Which of these elements is missing here?

1, 2 Edmund Blair, Reuters