Contributors: Haidar Noureddine, Christy BouMansour, Haya Mouakeh, Jennifer Sabra, Hanine Charanek, Mohamad Kanj
The Downfall of the Lebanese Lira
Abu Ali, a farmer living in Beqaa valley in Lebanon was facing problems with his apples crops after he was forced to cut the pesticides used because of the price increase after the Lebanese crisis.
He wasn’t sure how to protect his crops after he put a lot of effort during the year and now he is worried because he doesn’t have any source of income anymore.
Ibrahim Tarshishy, who is also a farmer in Beqaa valley, was not able to sell all his apple crops where half of them got moldy. “To be honest, I don’t expect the days ahead to be good. I see before us more depression, sadness and poverty”, said Ibrahim Tarshishy, a farmer in Riyak region, Lebanon”
Like these two cases, lot of farmers were facing like these problems, and no one was able to help them, and as we reach the conclusion of 2022, Lebanon’s financial woes are rapidly approaching the critical stage, and the Lira exchange rate is reaching a breaking record.
The Lebanese Lira exchange rate decreased because the supply for dollar was not enough to match the demand, and the central bank did not have enough reserves to interfere and match it with the demand. The demand for dollars was mainly driven by the aim to complete imports transactions. Since 2002, the net trade balance was negative, and the deficit was growing, reaching very high levels to around $14 Billion in 2014. This means that imports were higher than exports, and so the dollars outflow was bigger than the inflow.
To maintain the exchange rate fixed, as it was the case earlier, Lebanon used to depend on two main sources for dollars inflow, net transfers sources, and financial account source. First, Lebanon used to depend on transfers which includes grants, loans, and personal remittances. The graph below shows that net transfers were bringing a significant amount of dollars. However, this source is very unstable. It is very fluctuating, and it depends highly on uncontrolled factors like the help from other countries that we can not control as shown in the graph.
The financial account consists mainly of Eurobonds, and investments in companies, and currency & deposits coming from abroad into the Lebanese banks. As shown, this account was a huge source for dollar inflow. However, again, it is very unstable, and very fluctuating. There are almost no two similar points that are equal. Further, it depends highly on uncontrolled factors. For example, after Iraq invasion, so many Iraqis transferred their money into the Lebanese banks, and so the dollar inflow increased, but this happened because an event that we do not have control over it.
These two accounts together were balancing the dollar demand needed from the imports. In cases of mismatch between dollar supply and demand, the central bank used to interfere by buying or selling dollars in the market to keep the exchange rate fixed. However, in 2018, we had the second largest BOP deficit as shown below, which means the second largest dollar shortage, but the central bank did not have enough reserves which caused the current crisis.
In summary, the crisis started mainly in 2018. However, the root reason behind it is not the absence of reserves, but that Lebanon was depending mainly on unstable sources of inflow for foreign currencies, which was very risky, and unstable to maintain because of the fluctuations.
To further enrich Lebanon’s economy, we introduce our project that aims on focusing on sustainable economic development that relies on an integrated export system, naturally creating tons of job opportunities by enhancing Lebanon’s agricultural sector due to the presence of fertile land, abundant water resources, good weather conditions .
The project will control the process from harvesting to exporting, and starting with enforcing regulations that benefit the farmers instead of making it harder for them to export their goods, implementing technical guides that monitors farmers’ techniques into adopting good agricultural transactions, as well as adopting training workshops administered agricultural engineers also supplying them with the latest and greatest equipment that regulate water usage while limiting their use of unsustainable substances, such as harmful pesticides, and providing alternatives that are viable.
Now, since Saudi Arabia is infamous for its totally dry lands and a central region that is characterized by extremely hot and dry summers, it harbors a very limited agricultural sector and thus heavily relies on importing olive oil as well as basic produce. We should make use of the current improving relationship between Saudi Arabia and Lebanon and prioritize exportation to this country due to the low and reasonable shipping fees.
The olive oil market in Saudi Arabia needs a lot of importation as a change in dietary habits throughout the entire country has spurred the consumption of it. Saudi Arabia started importing about 30,000 tons annually while only producing 20% of its own olive oil, but that’s slowly changing as it’s heading towards an independent olive oil market realm that’ll eventually decrease the exports. We won’t focus on increasing the imports from Lebanon but on decreasing the shipping and customs fees that were introduced in June of 2020.
As we mentioned above, a huge change in dietary habits and healthy eating have welcomed Saudi lifestyles, thus making produce, especially apples, way higher in demand. Lebanon exports apples to Saudi Arabia in relatively low quantities as opposed to other countries because of strict pesticide regulations. To increase the exports, we should introduce strict laws that modulate their usage.
Lebanon’s avocado exports were totally banned in Saudi Arabia because of drug smuggling fiascos, which led the Saudi government to enforce harsh consequences that will only be salvageable by an examining process that helps avoid any trials of smuggling drugs.
Cyprus makes a great exporter as well, as it only holds 14.52% of agricultural land that is extremely affected by small temperature inconsistencies. Our focus on Cyprus is mainly due to the distance from Lebanon, which is only 26 kilometers, making it extremely easy for shipments to move within those countries.
The olive oil market in Cyprus is in a desperately high demand since the consumption of olive oil is three times greater than what the country produces. Because of this, we should encourage exports from Lebanon in a way that competes with both Germany and Spain, since they’re offering their olive oil at similar and lower prices.
Considering Cyprus is one of the most countries with apple shortage, it exports most of its apple supply excluding Lebanon from its exportations because of a heavily regulated pesticide system, solving that issue requires us introducing strict pesticide laws, after that we can start exporting to Cyprus at the same rate and price that we export to Turkey.
Because of the free trade agreement between European countries, Lebanon is unable to compete equally with European countries at exporting avocados, yet we are able to compete with Egypt, which offers a lower price. To solve this, we can try and export at a lower price than Egypt.
Fatou is a 27-year-old housewife. At 15 years old, she decided to quit her education to get married to the love of her life, a man 8 years older than her, who had promised her a wealthy life in which she wouldn’t worry about a thing.
A few years into her marriage, her husband wasn’t doing well financially, and she found herself financially abused by him. All the promises went into vain and she was there begging for a penny to get the most basic goods she needed. Looking at herself, she found herself with no knowledge or skills to help her stand on her feet. With no education to support her, she felt like all the doors were shut, and her only salvation was her husband, who in turn belittled her for always being dependent on him, noting that it had been himself who stopped her from being an achiever.
This is not only the story of Fatou, but also that of millions of women living in disparity because they couldn’t be self-sufficient and independent. This story is yet another example of what the SDGs tackle, like Reduced Inequalities, among others as Quality Education and Gender Equality.
The contribution of women in the society decreases early marriage, and early marriage is linked to low education.
The graph shows the countries with the highest number of women who were first married by age of 15.
The top 3 countries with the highest number of women who were early married are Niger with 37.37% , Bangladesh with 32% and Chad with 29.25%.
Moreover, 76% of girls in Niger are married before their 18th birthday and 28% are married before the age of 15. Niger has the highest prevalence of child marriage in the world and the 13th highest absolute number of women married or in a union before the age of 18 globally – 745,000.
As a result, Awareness campaigns must be done to limit early marriage, and impose laws on marriage before 18.
In the time it has taken to read this article 39 girls under the age of 18 have been married
Each year, 12 million girls are married before the age of 18
GameStop was heading towards bankruptcy, with hedge funds taking short positions in companies like GameStop, in which they borrow shares of the stock at a certain price under the expectation that its market value will be worth less when it’s time to actually pay for those borrowed shares. In other words, they are betting on the stock price dropping, however something unexpected happened, the Gamestop stocks surged being driven by retail investors — individuals who buy and sell stocks for their own gains, as opposed to professional investors working on Wall Street — on the subreddit r/WallStreetBets (WSB), a community 2.9 million-strong decided to buy up as much shares of stocks as a joke. That ended up reviving GameStop, incurring massive losses on the hedge funds, and shaking the stock market. This short squeeze – as it’s referred to – is not uncommon but it doesn’t tend to play out in this public or dramatic a manner leading this case to be the talk of every news outlet at the time.
This case perfectly encapsulated the volatility and unpredictability of the stock market, as well as how it can be influenced heavily by the everyday person. Such cases also emerged with Eli Lilly and their Twitter fiasco more recently.
As such we recommend the deployment of a brand followup division for social media from companies, as well as more rigorous bylaws implemented within social media platforms in order to control, contain, and possibly prevent such situations.
Omar El Khatib
Karim El Hajj
Bassel Abou Zahr
“I had to work twelve-hour shifts, for seven days weekly in order to keep up with my son’s medication prices, which keep increasing every week. Only to later find out that, when I had the money, I could not find the drug. ” This was the story of Wafic, one more individual affected by the drug shortage and inflation. In this case, Wafic was looking for a drug to treat his schizophrenic son; however, he was unsuccessful, and similar cases to Wafic’s occur daily. Wafic and the many others who are affected by these circumstances are the inspiration to improve the pharmaceutical sector in Lebanon.
The team had the opportunity to discuss, although briefly, the current situation regarding the pharmaceutical sector in Lebanon with Mr. Karim Jbara, who is the head of medical imports in the country. During the sit-down, it was emphasized that Lebanon’s medical drug shortage issue stems from the currently unreliable subsidy system which is permeated with inefficiencies and compromises in the wrong instances. Hence, the team brainstormed on how to tackle issue by issue and proposed to implement a reform in the subsidy system, to target instead of medical drugs, the patients themselves. This ensures funding is reaching the right people, at the proper time, and improving the country’s overall access to medical drugs.
The shortage of drugs is a symptom caused by the current, unreliable, and inefficient subsidy system in effect until today. How so? At first, the decrease in funding, from $85 to 25 Million dollars dedicated to the import of medical drugs exacerbated the already-fragile system. Moreover, the dedication of 77% of the current budget to oncology drugs leaves little to subsidize other ailments such as hypertension, diabetes, psychiatric disorders, and other chronic diseases. What is the issue with prioritizing oncology drugs? Well, even though cancer is life-threatening and very much deserving of attention, it does not justify the neglect of chronic diseases. The reason is, chronic diseases might not seem fatal at first, but over the long run, without one’s due diligence, they develop into risky scenarios. For example, schizophrenic patients are likelier to become aggressive, and diabetics patients risk losing their vision or limbs. Hence, this allocation cannot be built as such, and there must be a better way to reach these people effectively, without compromising oncology spending. Lastly, the fact that biosimilar drugs at the same dosage, are subsidized at different price points and from different countries shows a lack of commitment to partition resources appropriately. It is not unheard of to renegotiate with partner countries during times of crisis, and at this point, the populace needs fewer brand options but richer diversity in treatment options.
The inefficiencies mentioned above are legitimate concerns, yet the aspect creating shortages is the unreliability of funding. Meaning that subsidies are not granted every month. Hence, pharmacies sell drugs in LBP, and at the limit stipulated by the Ministry of Health and must replenish periodically. However, there is no incentive to replace this medication in case it’s not subsidized, as it would be imported at its original price in dollars. This a loss for the pharmacies as even if allowed to be sold in dollars, prices are out of reach for locals. Even worse, Black-Market dealers exploit this shortage to profit over a greater margin, than that stipulated by the MOH.
After the team resumed the meeting with Mr. Jbara and brainstormed about the issue, it came to our attention that most of these inefficiencies and their consequences can be addressed by shifting focus to subsidizing patients instead of drugs. What justifies this idea is that funding on its own is not enough. For example, the USA is the greatest spender in healthcare but not necessarily the country with the best health indicators (e.g., life expectancy). Hence, the team proposed an app and database linking the patient, the MOH, and an international institution willing to grant funds aimed to subsidize people. Accordingly, importers and pharmacies will have a stable market to import to and sell. The government won’t need to stipulate prices monthly, and the populace, at any socioeconomic level, will be able to find and afford the medications desired.