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Janae Pierre: You're listening to The Takeaway. I'm Janae Pierre filling in for Melissa Harris-Perry. In Beirut, Lebanon last week, an armed man took hostages at a bank because he couldn't access his own money, funds he needed to pay for urgent medical care for his father.
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After an hour's long standoff, the man accepted a portion of the funds he was trying to take out of his bank account. The money was given to his brother in exchange for turning himself in and releasing the hostages. Meanwhile, crowds had gathered outside the bank to support him.
Sarah Dadouch: He walked out with a wave to thousands of people who had gathered to support him and voiced their anger about a banking system that's been accused of misusing funds.
Janae Pierre: This event underscored the deep economic crisis that Lebanon has been experiencing since 2019. According to the World Bank, it could be one of the world's worst economic crises since the mid-19th century. Here with me now is Sarah Dadouch, Washington Post correspondent covering the Middle East. Sarah, welcome to The Takeaway.
Sarah Dadouch: Hi, Janae. Good to be on.
Janae Pierre: Give us some more details on this, man. Why couldn't he access his funds? Is this common for people not to be able to access their own money?
Sarah Dadouch: Unfortunately, yes, that's the new reality in Lebanon. The man, Bassam al-Sheikh H is one of most people in Lebanon who can't access most of their money in the bank. Since the crisis hit Lebanon in 2019, the banks have individually introduced what you could call unlawful capital controls because the Central Bank is the one who is supposed to put out circulars that determine how much you can withdraw from your own accounts. Because the Central Bank has not been doing any of that, there has been almost no oversight and no responsible body for the banking institutions in Lebanon.
Banks have been deciding on their own how much money they're allowing people to withdraw from their own banks. Right now as it stands, the banks allow depositors to take out $400 out of their bank a month in actual US dollars and then 400 in Lebanese lira, according to a rate that is not official but under the actual black market rate that's going around right now.
Bassam al-Sheikh Hussein like you mentioned, wanted to pay medical bills for his father who was deeply sick. He also has a very sick son who he needs to pay medical bills for. He has about $210,000 in the bank, which is a lot of money. At the current rate, it would take him some 43 years to be able to withdraw all of his money from the bank at the $400 allotments. He sadly is just one of the majority of people who don't have clouts to get their money out of the bank.
Janae Pierre: Wow. That's unfortunate. Sarah, give us a sense of the toll the economic crisis is having on locals there.
Sarah Dadouch: It's very easy to see because Lebanon was for decades the center of opulence and luxury. You find the most expensive cars, the fanciest beach clubs, they call it the Paris of the Middle East because it's a place, a wash with luxury and billionaires and business tycoons. Now, a lot of that opulence has gone. Now, you see heartbreaking images every single day that you never saw before of people, not just very poverty-stricken people, but people who used to be in the solid middle class asking for money on the street, going through garbage in rich neighborhoods.
You can see the middle class disappearing day by day because a lot of the people who could leave have been leaving as they can't make rent, and they can't afford to catch up with inflation. There have been almost no jobs thanks to the economic crisis, COVID. There was a blast two years ago in the Beruit port that destroyed much of the capital, displaced hundreds of thousands, and killed over 200. It's just been a string of calamities for Lebanon every month in the last two years, and people are paying the price.
Janae Pierre: Sarah, who is to blame for the economic crisis, and why haven't politicians done anything yet?
Sarah Dadouch: The politicians are really a big part of the problem. There's many factors that led to this. The main problem, the main financial problem in Lebanon, the source of it is from the Central Bank. Lebanon Central Bank Governor, Riad Salameh was lauded for decades as a genius internationally, not just in Lebanon, who was able to energize the banking sector. He had all of these people. There's a lot of Lebanese people who live abroad. There is more Lebanese people living abroad than there are in the country.
A lot of them send their money back to Lebanon, put it in the bank where they used to get some 20% interest, and freeze it for two to three years just because they got very high-interest rates and everyone was happy. The only problem is the Central Bank in Lebanon is not the US federal reserve. The Lebanese Central Bank does not print dollars. Riad Salameh had pegged the Lebanese lira to the dollar for decades and decades.
The peg still officially exists, but at some point, the question arose of where is the interest in dollars coming from. The answer turned out to be, it was coming from new investors. We suddenly in 2019 saw come to light, Lebanon's massive Ponzi scheme. The World Bank has called it Lebanon's Ponzi finance scheme, that has caused unprecedented social and economic pain.
When a revolution started in 2019 and people took to the streets to protest what they see as corrupt politicians that have been in power for decades, the banks shut down and when they came back, in fear of a bank run, they stopped allowing people to access their money. Then all of the cracks started coming out at the same time,
Janae Pierre: Parliamentary elections in May brought in new independent candidates and it gave some hope that things would change. Has anything changed?
Sarah Dadouch: The elections brought in independent candidates, which I think has more of a social impact and a big impact on morale than it does on the economic situation. The creation of a government itself was necessary to get a solution for the economic situation. The current Prime Minister Najib Mikati, who's one of the richest men in the Middle East and the world, his government is in negotiations with the IMF for a massive bailout for Lebanon.
The main thing that the elections was able to deliver is the existence of a government because they just needed any government in order to continue negotiations. because there were fears of stalling by different political parties. What the independent candidates have provided is give a voice to the people. The fact that we saw someone who took hostages at a bank and the fact that we saw such widespread support, including from MPs, some tacit support from new independent MPs was a sign for people that the reality they're living in right now is not okay.
Janae Pierre: You briefly mentioned the IMF, that's the International Monetary Fund. Is that the main solution that could save Lebanon?
Sarah Dadouch: As it stands right now, yes, because Lebanon's economy is heavily reliant on tourism and the banking sector, both of which have obviously taken a massive toll. Tourism in large part because of COVID and because of the blast, which eviscerated a big part of Beirut's very touristic areas. Right now Lebanon owes so much interest on its debts that there is no other solution viable. This is one of many solutions that need to happen in order for Lebanon to get back at its feet.
Janae Pierre: Is anyone in any international community trying to help the country?
Sarah Dadouch: The problem with providing economic help to Lebanon is that the international community has made it clear, and in some situations like France have outright said that they no longer trust the leaders of the country. The problem is where to direct money. When you see a country ruled by what is perceived to be very corrupt politicians, it doesn't make sense to send more money to those same politicians.
To circumvent that the United States tries to give money to the Lebanese army or to different institutions, but as an actual solution to bail the government out. the IMF is the main way to go. Because there is a hesitancy from the international donors, the international community, and the local population to hand any more money to the politicians in power.
Janae Pierre: Sarah Dadouch is a Washington Post correspondent covering the middle east. Sarah, thanks for joining us.
Sarah Dadouch: Thank you so much.
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