Explained | Lebanon’s economic meltdown and why people are robbing banks for their own money

Lebanon’s financial system has been in paralysis since 2019 with the Lebanese Pound having lost nearly 95% of its value

The story so far: On Friday, September 16, five incidents of bank robbery attempts, not the first of their kind, were reported in Lebanon. One of the incidents involved an armed man, identified as Abed Soubra, demanding to withdraw $300,000 cash from BLOM bank in the capital Beirut. Soubra later handed his gun to security but stayed locked in the bank till evening. 

Attempts such as this one, however, were by individuals seeking access to their own savings. Multiple such incidents, often involving armed individuals, have been reported since the start of this year and are a manifestation of Lebanon’s unrelenting economic crisis that began in 2019. The economic downturn in the already politically unstable country has been compounded by the COVID-19 pandemic and the 2020 blast at the port of the Lebanese capital Beirut.

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The World Bank has described Lebanon’s crisis as one of the “top 10, possibly top three most severe economic collapses worldwide since the 1850s”.

The dollar accounts along with blanket withdrawals of Lebanese depositors have virtually been frozen in the country’s banks since the onset of the crisis in 2019, with banks introducing what have been called “draconian” controls on withdrawals. Depositors can only withdraw the equivalent of $400 dollars in a month, according to the Financial Times. And when depositors withdraw in local currency, the exchange rate takes away 95% of its value. At different occasions this year, the Lebanese Pound has been valued at 25,000 and even 35,000 to the dollar on the black market.

The country’s Gross Domestic Product plummeted to around $21.8 billion in 2021 from nearly $52 billion in 2019, marking a 58.1% contraction. Such a contraction, according to the World Bank, is associated with drastic events such as wars.

In contrast, when several countries were reeling from the effects of the 2008 global financial crisis, Lebanon clocked a 9.1% growth in real GDP. Its economy was booming, and its banks were resilient, with the International Monetary Fund commending the efforts of Riad Salameh, the governor of its Central Bank, Banque Du Liban (BDL). Meanwhile, last year, the country marked a negative growth of -19.2% in its GDP.