Planet Money: The indicator from Planet Money: NPR

Joseph Eid/AFP via Getty Images

People exchange Lebanese pounds and US dollars at the black market in the Lebanese capital Beirut, June 18, 2020 (Photo by Joseph Eid/AFP) (Photo by Joseph Eid/AFP via Getty Images)

Joseph Eid/AFP via Getty Images

Lebanon has been going through an economic and financial crisis since 2019. Indeed, the World Bank calls it “One of the most severe global crises“In more than 150 years. There is a shortage of everything, from food to fuel … and even electricity itself. But perhaps most importantly, the money itself is also in short supply.

We hear from Lebanese economist Nisreen Salti about the era that followed the end of the Lebanese civil war, when there was hope for the economy to re-grow and even for Beirut to become the financial center of the Middle East.

Nasreen says that the big mistake that put Lebanon on a path from hope to despair was the exchange rate decision. Lebanon decided to fix the exchange rate of the local currency against the dollar. While this stable exchange rate gave foreign investors certainty, Nasreen says it has been “maintained long after his healthy life”. For more than two decades, the government borrowed more and more money to maintain the exchange rate, until debt boomed and defaulted in 2020. From there, everything went downhill.

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