The world replenished with another sick economy

UNITED STATES (OBSERVATORY NEWS) — Lebanon is named the new country of the world with a sick economy. Two leading global agencies – Moody’s and S&P Global Ratings simultaneously downgraded Lebanon’s long-term rating ten levels below the investment level.

This is the beyond, the so-called “garbage” level.

The country is currently rated lower than Argentina and the Democratic Republic of the Congo, CNBC notes .

Lebanon is a Mediterranean country, adjacent to successful Israel, Syria, which is in a civil war, and not the most prosperous Turkey.

Lebanon’s ruined economy and huge debt led the country to the list of world outsiders. Lebanon has the highest debt in the world – 160 percent of GDP.

The country is experiencing the worst financial crisis since the brutal civil war of 1975-90 and after months of recent popular protests.

Nabi Berry, Speaker of the Lebanese Parliament, said debt restructuring would be “the best result.” This means that the country will declare default, inability to pay all debts, and creditors will receive only part of what was given to Lebanon.

The country is in the middle of several crises at once – banking, currency, debt crisis. This is almost the collapse of the country.

For many years, Lebanon suffered from low GDP growth, high unemployment and rampant corruption. The country is 137th out of 180 countries in the 2019 Corruption Perception Index, which is Transparency International.

Economists argue that the country’s central bank policy, which involved attracting dollar deposits from local banks at high interest rates — often at 15 percent — to finance government spending, was also to blame for the crisis.

Lebanon has lived beyond its means for years, experienced double deficits – both in the balance of the state budget and in the balance of the current account. This required a certain amount of investor confidence. But in recent years, this confidence has dried up, and therefore the flow of capital to the country has stopped.

Lebanon is now left with a dollarized economy, and there are no more dollars in it to pay off debt, import goods, no dollars to return deposits to people. This is an old Ponzi fraudulent scheme: to take new money from new investors, investors, in order to continue paying off old ones.


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