Why Lebanon's Economy Is In A Financial Crisis : Planet Money : The Indicator from Planet Money Lebanon's economy is in freefall. The World Bank calls it one of the worst financial crises in a century. We look back at Lebanon's optimistic years, zooming in on the one key decision that started this house of cards. And we ask what this can teach us about booms and busts in general.

How WhatsApp Broke Lebanon

How WhatsApp Broke Lebanon

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Joseph Eid/AFP via Getty Images
People exchange Lebanese pound and US dollar notes on the black market in Lebanon's capital Beirut on 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. The World Bank even calls it "one of the most severe global crises" in over 150 years. There is a shortage of everything, from food to fuel... to even electricity itself. But maybe most importantly, money itself is also in short supply.

We hear from Lebanese economist Nisreen Salti about the era following the end of the Lebanese Civil War, when there was hope to regrow the economy and even for Beirut to become a financial hub for the Middle East.

Nisreen says that the big mistake that set Lebanon on a course from hope to despair was a decision about the exchange rate. Lebanon decided to fix the exchange rate of the local currency to the U.S. dollar. While this stable exchange rate gave overseas investors certainty, Nisreen says it has been "maintained well past its healthy life." For over two decades, the government borrowed more and more money to maintain the exchange rate, until it had burgeoning debt and defaulted on payments in 2020. From there, everything went downhill.

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