Behind the Collapse of the Lebanese and Sri Lankan economies, whose fault is it? page all

KOMPAS.comLebanon and Sri Lanka may be worlds apart, but they share a history of political turmoil and violence that led to the collapse of a once prosperous economy.

Today, both countries are beset with corruption, patronage, nepotism, and incompetence.

Reported APthe toxic combination led to disaster for both: currency collapses, shortages, triple-digit inflation, and rising hunger.

Also read: Observing Lebanon’s Inflation Rate which Reaches 211 Percent

Snaking queues for gasoline, a crumbling middle class, added to the weight of the load.

Usually not a single moment marks the catastrophic culmination of an economic collapse, although the signs could be there for months, if not years.

When that happens, adversity will change everything, everyday life will be crippled, the country may never return to the way it was.

Experts say that a dozen countries, including Egypt, Tunisia, Sudan, Afghanistan and Pakistan, could suffer the same fate as Lebanon and Sri Lanka.

The post-pandemic recovery and war in Ukraine have fueled global food shortages and price spikes.

Also read: Lebanon Warns of Israeli Aggression in Disputed Waters

The crises in Lebanon and Sri Lanka are rooted in greed, corruption and decades of conflict.

Both countries experienced a long civil war followed by a weak and rocky recovery.

Rulers are also dominated by corrupt warlords and family groups who amass huge foreign debts and stubbornly hold on to power.

Popular uprisings in Lebanon have been unable to shake the political class that has long used the country’s sectarian power-sharing system to perpetuate corruption and nepotism.

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Also read: Lebanese elections: Hezbollah fails to gain control of parliament, support for reformists soars

Key decisions remain in the hands of political dynasties who have come to power because of their enormous wealth or by leading militias during wars.

In the midst of rivalry between factions, political paralysis and government dysfunction worsened.

As a result, Lebanon is one of the Middle East’s most backward countries in infrastructure and development, including extensive power outages that lasted 32 years after the civil war ended.

In Sri Lanka, the Rajapaksa family has monopolized politics in the island nation for decades.

Even now, President Gotabaya Rajapaksa still holds power, even though the family dynasty around him has collapsed amid protests since April.

Also read: Sri Lanka Bankrupt, Parliament Cancels Weekly Meeting to Save Gasoline

Experts say the current crises in both countries are of their own accord, including high levels of external debt and little investment in development.

In addition, both countries have experienced repeated instability and terrorist attacks that overturned tourism, the mainstay of their economies.

In Sri Lanka, Easter suicide bombings at churches and hotels killed more than 260 people in 2019.

Lebanon has suffered from neighboring Syria’s civil war, which has flooded the country of 5 million with about 1 million refugees.

Both economies then took another hit with the start of the coronavirus pandemic.

Also read: The Prime Minister of Sri Lanka: Our Economy Is Really Collapsing

The Lebanese crisis began in late 2019, after the government announced proposed new taxes, including a $6 monthly fee for using Whatsapp voice calls.

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The moves sparked long-simmering anger against the ruling class and months of mass protests.

Irregular capital controls were put in place, cutting people out of their savings as the currency started to spin.

In Sri Lanka, with an economy still fragile after the 2019 Easter bombings, Gotabaya pushed for the biggest tax cut in the country’s history.

Also read: Sri Lanka Crisis: Failure of Financial Management and Governance

That sparked a swift reaction, with creditors downgrading the country, preventing it from borrowing more money as foreign exchange reserves plunged.

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