Economic and political corruption and mismanagement have left the Lebanese people coping with shortages, exorbitant prices, loss of wealth and security, and a generally uncertain future.

This week, while reading a slew of WhatsApp messages from family in Lebanon, I was shocked to hear that my cousin Dalila had to pay the equivalent of USD 200 for dairy products for her family. Expensive dairy is the least of Dalila’s worries, however. As a new mother, she is facing quotas when buying products for her baby boy. “Last month was hard because I was only able to buy two of each item — a maximum of two diapers!” she told me. Her biggest problem is getting formula: “All baby formula is out of stock. They are not going to bring them to Lebanon anymore.”

This is the new normal for Dalila and all mothers during Lebanon’s second month of hyperinflation. But for me, this is a shocking departure from the Lebanon I remember. It was just two years ago that I spent a few weeks in Beirut with my family, celebrating Dalila’s wedding. We spent those summer nights going to many of Beirut’s fabled restaurants and enjoying the vibrant shopping centers, the streets filled with sleek sports cars, and the extravagant hotels that the Mediterranean nation is known for. During the day, we’d venture to different beaches, amazed at the lavish coastal resorts. On family visits to surrounding villages, we were greeted with trademark Lebanese hospitality. From the moment you step into a house, there is a full mezza set out with hummus, tabbouleh, grape leaves, nuts, and much more. Just when you’re about to burst, platters of kebabs, rice, and vegetables are brought out, topped off by towers of fruit for dessert. And, of course, an ornate hookah was at the disposal of any visitor as they ate and drank.

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In a word, it was a place of abundance. But the “land of milk and honey,” where locals boast of their ability to “ski and swim in one day,” is now financially gutted, leaving its citizens wanting for electricity and even meat.

The rumblings began in October, when a proposed WhatsApp tax sparked massive protests against the Lebanese government and its decades of corruption. Since then, the Lebanese economy has crumbled and the nation has defaulted on its Eurobond loans, government services (which were always unreliable) have virtually disappeared, and Lebanon has become the 62nd case in history of hyperinflation, with a rate of 462 percent. Lebanon and Venezuela are the only two countries in the world currently experiencing hyperinflation.

Many chalk up the nation’s crisis to years of a government-led Ponzi scheme. In a New York Times op-ed, Lina Mounzer, a Lebanese citizen, points to years of unsustainable interest rates and debt financing by Lebanese banks in conjunction with the central bank, the Banque du Liban, and the government. Mounzer notes that politicians achieved “individual enrichment” using “increased public debt.” More specifically, Lebanese banks offered exorbitantly high interest rates to attract foreign currency — mainly U.S. dollars — to maintain the peg for the Lebanese pound (LBP).

This system came to be after the end of Lebanon’s civil war in 1990, when the government and central bank opted to use attractive rates to encourage investment in Lebanon. The goal was to keep a constant exchange rate between the LBP and the dollar (1,500 LBP/USD). Instead of investing this money in infrastructure repair or desperately needed government services, Lebanese politicians lined their own pockets.

Using high interest rates, banks gained foreign deposits and lent foreign currency to the government in the form of treasury bills. But this money was never put toward helping the Lebanese people after the destructive civil war. A family friend, Lebanese businessman Wadih Bassous, told me, “Because of corruption, most of that money went into the pockets of crooks.” He continued, “This is a very unhealthy cycle: You bring in money [but] instead of being spent on good things, it was stolen. This is making the debt grow like a bubble and you have to pay high interest on this debt which compounds the deficits and the outflows on the budget.”

What’s more, interest rates became too expensive for the private sector, “asphyxiating it at the expense of the public sector,” Bassous told me. “So while banks were making huge paper profits the real economy had been struggling forever.”

According to a Think Triangle report, the Lebanese economy became dependent on “regular injections of US dollars to create a veneer of financial stability,” effectively putting the financial system and government in Ponzi scheme mode. More specifically, the central bank offered high interest rates to private banks in exchange for debt in U.S. dollars. As confidence in Lebanon fell, these injections of U.S. currency from the Lebanese diaspora and other investors dwindled, and the Banque du Liban could “no longer produce the estimated $4 billion annual interest it owes to the commercial banks on their $60 billion of deposits.”

Meanwhile, the state could not withstand the rising debt of around $86 billion (for reference, the GDP of Lebanon is $56.64 billion). Lebanon was already notorious for inefficient taxation, collecting at only 15 percent of its GDP annually though the nation has the ability to collect at 34 percent. According to the report, “A cursory glance at Lebanon’s economy is enough to show that the state spends considerably more than it receives in revenues from taxes and other income.”

The result was disastrous. Since early 2020, banks have put caps on withdrawals of U.S. currency. In an import-dependent economy, the drying up of foreign currency hits consumers especially hard. In December, my relatives repeatedly lamented withdrawal limits of about $300 a month. As one relative told me, the caps fluctuated depending on the bank and the balance held in individuals’ accounts.

What’s more, the exchange rates are draining Lebanese citizens’ wealth. Bassous noted that there are now three different USD–LBP exchange rates. The official exchange rate is 1,500 LBP per USD. According to his estimates the bank rate for withdrawal is 3,000 LBP per USD and the black-market rate, most closely associated with true supply and demand for USD and most commonly used for pricing, is 8,000–8,500 per USD. Expressing great disappointment, he said that this is “the first time in the history of Lebanon that we have more than one rate. It’s common for . . . Venezuela and other countries that lack freedom in the movement of their funds [but] it’s a complete novelty in the history of Lebanon. We were proud to have one of the most liberal and efficient banking systems and now that’s come to an abrupt end.”

These different rates mean that USD from the bank will get you less in a store that uses a different exchange rate. “If they gave you USD bank notes, you could go to the black market and get [LBP] 8,000, but you can’t get them in bank notes, you get them at bank rate, roughly half the black-market rate.” A cousin noted that the banks are also taking a cut: “Whoever has dollars in the bank, the bank gives it to you for the rate of LBP 3,900, so they’re taking a cut of the money that you have in the bank.”

One of the greatest ironies is that the Lebanese financial sector — both the private banks and central bank — was under the audit of firms, such as PwC and Deloitte, that were keenly aware of the unsustainable Lebanese practices. For example, EY and Deloitte signed off on a central-bank financial statement from 2018 that inflated assets by $6 billion. Central bank governor Riad Salameh attributed this sum to “the liability balance from seigniorage to deferred interest expense and other finance costs.” However, banks often record seigniorage as income rather than as an asset.

With the financial system having effectively crumbled, it is the Lebanese people who are suffering the worst of the crisis. Poverty is up to almost 50 percent, and unemployment is around 35 percent. The current Lebanese lifestyle is one ruled by uncertainty. Basic necessities are scarce, prices are high and constantly fluctuating, and government services have essentially halted. Many citizens are forced to cough up huge sums for essentials yet, as a cousin told me, are “getting paid the same or even half salaries.”

Dalila told me that she paid around USD 12 for cream cheese this week, when she was used to paying only USD 2. “Every day is different” depending on fluctuations in exchange rates. For her family of three, Dalila spends, on average, the equivalent of USD 256 at the bank rate or USD 125 at the black-market rate for a week’s worth of basic groceries, excluding meat and chicken. With those items now priced like luxuries, buying them adds “way more” to her grocery bill.

Skyrocketing prices on imported goods such as meat have made restaurants another major victim of this crisis. A cousin told me that most restaurants have simply stopped offering meat on their menus. Retailers are suffering as well, she says: “It doesn’t make sense for them to sell anymore.”

The scarcity of medical supplies has become a matter of pressing concern for Lebanese patients. One relative told me that she paid the equivalent of USD 30,000 for a procedure to change the battery in her defibrillator. “Soon there won’t be medicine so I am stocking up,” she said. Her friend who relies on a mechanical respiratory aid faced a similar issue — in just one week, the cost of the solution needed for her machine rose from LBP 6,000 to LBP 60,000. Given the ongoing fluctuations, there is no telling the USD prices that Lebanese in need of medical care will face as the crisis continues.

For one of my relatives, the situation in Lebanon is a double tragedy. A Venezuelan-Lebanese, she returned to Lebanon permanently after decades in Venezuela, fleeing that country’s hyperinflation to take advantage of Lebanon’s stable food supplies and more abundant health care. Now she finds herself coping with the same problems she tried to leave behind.

As the daughter of a Venezuelan immigrant to Lebanon, I can attest that my family has lost assets in both countries after having moved businesses from Venezuela to Lebanon. Safety has also become a concern. In the early 2000s, I myself had to end my regular travels to visit family in Venezuela; now I must do the same with visits to Lebanon.

Shortages of fuel and government-provided electricity pose another problem. Electricity cuts are leaving some with as few as two hours of electricity a day. Sporadic availability of power affects everyone, including businesses and hospitals. Both “businesses and families have to fully rely on generators,” a cousin told me. To add to the country’s woes, the diesel that powers these generators is growing scarcer by the day: “The government is selling the diesel to Syria. They are making money out of it.” The diesel that remains in private hands is rationed and sold at exorbitant prices.

In the hot summer months, Dalila and citizens like her are sleeping on their terraces because of the lack of air-conditioning. “My baby was crying a lot” because of the heat, she told me.

Among Lebanon’s youth, the economic uncertainty is palpable. A Lebanese university student told me that “the student has one thing in mind: leave when they have the opportunity.” Lebanon offers no job prospects for the time being. “I would really like to stay, work, and grow old here. But at the moment, it’s better if I go live abroad for a while,” he said.

With the constant uncertainty and lack of government support, many Lebanese are looking for ways to cope on their own. Some have resorted to bartering, using a Facebook group to post items ranging from milk and wheat to books and electronics. Within two months, this group has amassed over 19,000 followers. In the post below, a member seeks to trade a television for olive oil (usually abundant and affordable in the region), coconut oil, and medicine. The contrast between the modernity of social networking and the country’s rising poverty is especially stark for a country once known as the Paris of the Middle East.

Private charities have stepped in to support the Lebanese people. According to one of my relatives, Lebanon’s many monasteries are serving meals to those in need, and faith-based groups like Caritas Internationalis are providing humanitarian aid.

The main coping mechanism of the Lebanese, however, is speaking out. Ruled by a sectarian government, the Lebanese people have united across ethnic and religious lines to call for governmental and economic reform. Since October, the country has seen massive protests calling for change.

As Mounzer writes, Lebanon’s confessional system of government “ensures that responding to citizens’ needs takes a back seat — and every chieftain and his cronies get their pockets lined.” Breaking down this religio-political system is key to addressing the economic corruption that has destroyed the country. Ending the corrupt symbiotic relationship between the government and the central bank will be the first step toward reform.

While the Lebanese people face a giant task, there is hope yet for the small nation. Lebanon has experienced many crippling changes in the past months but retains its unity and nationalism. In a region generally known for divisive sectarianism, Lebanon is an important exception. The joined voices of Christians, Sunnis, Shiites, and Druse reinforce the resilient spirit of the Lebanese people.