Trade finance in Lebanon: A recipe for collapse - ESCWA

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Trade finance in Lebanon: A recipe for collapse

ESCWA Publication: E/ESCWA/CL3.SEP/2021/TP.21


Country: Lebanese Republic

Publication Type: Information material

Cluster: Shared Economic Prosperity

Focus Area: Financing for development

Initiatives: Transport and trade connectivity

SDGs: Goal 8: Decent Work and Economic Growth

Keywords: Trade financing, Economic development, Economic integration, Export development, Technical cooperation

Trade finance in Lebanon: A recipe for collapse

March 2022

The COVID-19 pandemic came at the heel of an already existing grave economic crisis that has affected all operating sectors of Lebanon and has revealed the structural weaknesses of the country’s fiscal and monetary framework. The pressure generated by the crisis on the country’s banking sector and its monetary policy resulted in the creation of a system of multiple exchange rates, which have weighed heavily on all trading activities between Lebanon and the rest of the world. 

Trade finance activity, in the once fully dollarized economy, has been hindered by an impaired banking sector, foreign exchange shortage, and fast collapsing currency leading to a more than 80 percent decrease in trading activity. Until today, with the absence of an efficient and well-functioning macroeconomic stabilization plan, recovery from this economic meltdown appears to still be challenging. Lebanon needs to adopt a comprehensive and coordinated strategy that brings financial stability in order to promote growth and development across the country’s productive sectors. Without such a comprehensive reform programme, it is impossible to foresee a reasonable relaunch of Lebanon’s trading activity even after the COVID-19 pandemic.

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