(21 Nov 2019) LEAD IN: Lebanon's financial crisis has been worsening for months.
With ongoing protests and the absence of a new government, Lebanese fear it could tip over into disaster.
STORY-LINE:
This is Hamra, one of Beirut's main commercial streets.
Store owners are cutting salaries by half or considering shutting down.
Shops advertise sales, but still can't draw in customers.
"Since 17 October we have not even sold 10 pieces, there are no sales at all, then there are the blocked roads and the situation is, as you can see," says Hatem Kayyal, shop vendor. "You go to the bank to withdraw money, if you do not have $100,000, they will not let you withdraw $1000, and if you have only $10,000, they will let you withdraw $200, its the same for Lebanese pounds. There is no liquidity in the hands of the people to buy or to accelerate the economic movement."
The only place doing a thriving business are the stores that sells safe boxes , as Lebanese are increasingly stashing their cash at home fearing a complete financial meltdown.
Banks have clamped limits on withdrawals of U.S. dollars. The Central Bank's sources for dollars are waning.
Politicians are paralyzed, struggling to form a new government in the face of tens of thousands of protesters in the streets for the past month .
"People are scared," said Khalil Chehab, owner of Shehab Security, a store selling safes on Beirut's Hamra Street. "they started withdrawing money from the banks to keep it at home."
Since the middle of last month, his business rose about 30%, he adds.
Clients of all economic levels have been visiting his shop. Chehab says he has safes for any budget, with prices from $35 to $15,000.
"The people who have many (bank) accounts, who are making more money, who have an income, are definitely not putting it (money) in the banks, they are definitely buying a safe box," says Chehab.
Lebanon has one of the highest debt ratios in the world, at around $86 billion or 150% of GDP.
Much of the government's budget is sucked up by salaries in the sprawling public sector, while infrastructure has gone undeveloped for years.
In addition, one of Lebanon's biggest problems is that it has a dollarized economy.
Since a crash in the Lebanese pound in the early 1990s, the currency has been pegged to the dollar. As a result, many things — from rents to cars to insurance premiums — are priced in dollars.
Most Lebanese get their salaries in local currency, however.
The crunch in U.S. dollars has created a black market in currency for the first time in years, with the dollar reaching 1,900 pounds this week.
Struggling with the broken economy, the government began hiking taxes and taking other measures, prompting small protests early in the year.
But the protests exploded across the country on Oct. 17 in response to a new round of proposed taxes and evolved into a revolt against the country's entire political elite.
Protesters blame the politicians for decades of systematic corruption and mismanagement that brought the country into its dire economic straits.
The prime minister stepped down on Oct. 29, but political parties have been unable to agree on a government since.
Multiple dangers stalk the economy now. The government is trying to avoid any sort of default or a rush on banks.
Consumers fear a collapse in the currency will wreck the value of their savings.
According to government officials, economic growth in Lebanon next year will be zero.
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