Lebanon’s Richest Need To Take a Haircut
Those who benefited from sky-high interest rates have to give up some of their millions.
The source of the problem.
Photographer: Hasan Shaaban/BloombergAt the root of the economic grievances fueling Lebanon’s mass protests lies what looks like a regulated Ponzi scheme. The problem will not be solved by a change of government—even with a cabinet of experts—or by injections of capital from friendly Arab states: it will require tougher measures, including a compulsory haircut for many of the country’s richest citizens.
For decades, Lebanon depended on remittances to sustain its economy and the lira peg. Fixed at 1507.5 lira to the U.S. dollar since 1997, the peg resulted in an overvalued currency, relative to the country’s productivity. This gave the Lebanese a higher income and standard of living than in any neighboring Arab country, allowing them to spend on travel, cars, clothes, and gadgets.