The Financial Crisis of Lebanon: Why Has the Inaction Persisted Since 2019?

Abstract

Since October 2019, Lebanon has failed to implement necessary measures for stabilization and recovery despite available reform plans. This thesis extends the discussion on the causes of the crisis, the needed measures, and the consequences of the absence of reform. It attempts to understand why inaction has persisted, to whose benefit, and how it was sustained.

To address these questions, the thesis employs a mixed-methods approach. It maps out prominent recovery plans, discusses hypotheses that may explain the continued inaction, and identifies conditions that have enabled occasional breakthroughs amid this inaction. It also incorporates data-informed analysis throughout the discussion.

The findings suggest that banks and political elites deliberately sustained inaction to shift losses onto depositors, the state, and society, even though they incurred costs in pursuing this strategy. In parallel, four other hypotheses explain inaction at specific stages – jointly offering a more comprehensive understanding of the crisis. Breakthroughs, nevertheless, did occur as a product of external pressure coinciding with local political initiative.