Explainer: Lebanon’s Financial Meltdown and How It Happened

Explainer: Lebanon’s Financial Meltdown and How It Happened

Lebanon is grappling with a deep economic crisis after successive governments piled up debt following the 1975-1990 civil war with little to show for their spending binge.

Banks, central to the service-oriented economy, are paralyzed. Savers have been locked out of dollar accounts or told funds they can access are worth less. The currency has crashed, driving a swathe of the population into poverty.

Where did it go wrong?

Lebanon's financial collapse since 2019 is a story of how a vision for rebuilding a nation once known as the Switzerland of the Middle East was derailed by corruption and mismanagement as a sectarian elite borrowed with few restraints.

Downtown Beirut, leveled in the civil war, rose up with skyscrapers built by international architects and swanky shopping malls filled with designer boutiques that took payment in dollars.

But Lebanon had little else to show for a debt mountain equivalent to 150 percent of national output, one of the world's highest burdens. Its electricity plants can't keep the lights on and Lebanon's only reliable export is its human capital.

How did it borrow so much?

Some economists have described Lebanon's financial system as a nationally regulated Ponzi scheme, where new money is borrowed to pay existing creditors. It works