Poverty in Lebanon is a central topic for the press, media, and research due to the complex crisis created by the collapse of the Lebanese lira coupled with banking, economic, social, and political crises, exacerbated by the coronavirus pandemic and the fallout from the massive explosion in Beirut on August 4.
Research typically supports the conventional wisdom that the poor pay the biggest price in times of crisis. In Lebanon, poverty is expanding both horizontally, as new segments of the middle classes join the ranks of the poor, and vertically, as living standards are further eroded and the poor get poorer. Such crises typically lead to greater social disparities and income and wealth inequality: the poor lose what little they own while the wealthy are able to avoid the adverse impacts. In fact, some of them exploit the crisis for profit at the expense of the majority and amid an overall decline in living standards and economic and development indicators.
This commentary looks at the mechanisms of horizontal and vertical impoverishment, as well as the impact of the crises on poverty and inequality and some of the old and new ways it is manifesting.
<h3 style="text-align: justify;">Poverty and inequality: The status quo</h3>
From the mid-1990s to mid-2019, Lebanese national studies indicated that about one-third of the population was poor and 6&ndash;8% were living in abject poverty. The overall poverty rate ranged from 15% in more affluent areas to some 60% in poorer regions, highlighting geographic disparities in Lebanon&mdash;a pervasive gap that has persisted since the 18th century between central Lebanon (Beirut and Mt. Lebanon) and the periphery (the north, the Beqaa, and the south) (Ministry of Social Affairs &amp; UNDP, 1998, 2007, 2008a, 2008b; Yaacoub et al., 2016). Currently it is estimated that more than half the population is poor.<a href="#sdfootnote1sym" name="sdfootnote1anc">1</a>
Vertical inequality, measured by the distribution of income and wealth, is also acute. Research by Lydia Assouad (2018), a member of Thomas Piketty&rsquo;s team, shows that in 2014 the top income decile in Lebanon earned 57% of income; the top 1% claimed 23% of income while the income share of the bottom half of the population was less than 11%. Data on the concentration of bank holdings shows that the top 1% of account owners, with deposits of USD1 million and up, own 47% of the value of all deposits, while 99% of depositors hold the remaining 53%. In addition 61% of the latter are small accounts with less than USD3,000, which represent just 0.6% of the total value of deposits.<a href="#sdfootnote2sym" name="sdfootnote2anc">2</a>
<h3 style="text-align: justify;">Impact of current developments</h3>
Current developments have exacerbated poverty and inequality in three parallel and overlapping ways:
1. The Lebanese economy is polarized and narrowly based due to its monopolistic nature, the dominance of service sectors (particularly brokerage and banking), and the excessive reliance on remittances, including remittances from expatriate Lebanese to their families and other individuals. Because of this, we see a concentration of wealth in the financial and real-estate sectors coupled with important income gaps between and within single sectors. Remittances from workers abroad have alleviated poverty for families receiving them, but they have also generated disparities within poor regions between local families with several members working abroad and families with a lower rate of migration. Remittances have declined in recent years, particularly since the global and local economic recession and also due to the coronavirus pandemic, which has adversely affected the living standard of certain families and expanded the ranks of the poor. In the realm of public policy, there have been no shifts in economic policies or the tax system. The majority of taxes continue to be indirect, meaning that redistribution mechanisms in Lebanon are extremely weak.
The tax system relies primarily on indirect taxes, particularly the value-added tax. The system has come in for severe criticism from economists and financial experts because of the lax demand it places on the financial and real-estate sectors, which have a relatively low tax burden compared to their significance in the economy. Estimated tax revenues in the 2019 budget totaled LBP14,274 billion, about 35% of which comes from direct income taxes&mdash;paid largely by public- and formal private-sector workers given the limited potential for tax evasion&mdash;and capital gains taxes. Property taxes account for 9%. The remainder is raised primarily from indirect taxes, with taxes on goods and services being the most significant, alone contributing 45% to the total.
2. The nature of the financial and banking system, as well as the dollarization of the economy<a href="#sdfootnote3sym" name="sdfootnote3anc">3</a>&mdash;currently around 70%&mdash;impact on poverty and inequality in two ways:
a. The first is through the depreciation of the Lebanese lira next to the dollar. In the space of a few months, the official price of the dollar rose from LBP1,500 to LBP7,000. As of this writing, it had reached more than LB8000. This has entailed a general decline in living standards, including among the poor, prompting the state, typically under pressure, to institute subsidies for some goods. This has all led to the emergence of a black market exchange rate, and it has also put additional pressure on foreign current reserves at the Banque du Liban, which warned that as of November 2020, it would be unable to pay for consumer imports. In turn, this could double or triple the price of subsidized goods, causing widespread immiseration and threatening an acute social crisis.
b. Secondly, a new type of disparity has arisen between people paid in Lebanese lira and people with incomes in dollars or other foreign currencies, as well as between people with savings or resources that can command dollars and those without. In short, people with foreign currencies have been able to accumulate wealth, particularly by acquiring assets at reduced prices due to other people&rsquo;s need for liquid cash. There is also a booming trade in bank securities and bonds, purchased at heavily discounted rates from people who are no longer able to make payments on them. This has impoverished parts of the middle classes without foreign currency savings to the benefit of big businessmen, contractors, bankers, and organized crime syndicates. There is a similar gap between people who are paid wages in dollars or other foreign currencies&mdash;this includes employees with various international organizations or with foreign corporations with branches in Lebanon&mdash;and those who are paid in lira.
3. The coronavirus pandemic has exacerbated the economic crisis, resulting in higher unemployment due to the shutdown. (Increased unemployment is partly due to the virus alone and at times related to other financial hardships or an unforeseen disaster like the harbor explosion.) The people most harmed in this case are informal workers, who constitute 55% of the total workforce (Central Administration of Statistics, 2020). It is anticipated that these workers will be vulnerable to severe poverty due to the loss of their income. These include workers in marginal professions like day laborers, as well as non-Lebanese workers and owners of small shops and sole proprietors. Certain sectors&mdash;shops, restaurants, tourism facilities, transport&mdash;have been affected more than others. There is also the issue of private educational system, which is facing a severe financial crisis due to parents&rsquo; inability to pay tuition on their eroding incomes. The crisis is even more acute for students studying abroad, who need scarce foreign currency for tuition. This will cause many students to lose the chance to study abroad, and some may return to Lebanon before the conclusion of their studies. Domestically, we may see a shift from private to public schools, which would be a fundamental lifestyle change for the Lebanese middle class.
<h3>Conclusion</h3>
Transformations currently underway in Lebanon are broader and more far-reaching than the narrow technical issue of poverty and inequality, involving financial, economic, social, political, and institution dimensions. It is a full-blown crisis of the system and the state. Overcoming it requires a societal transformation that must begin with political system, given the latter&rsquo;s concrete, decisive role. But it must also include a broad consideration of the process of immiseration, rather than dealing with poverty as a question of a set number of poor people that either increases or decreases.
Most published estimates, projections, or measurements of poverty in Lebanon do not keep pace with the very rapid changes in currency prices, making any financially based measurements wholly irrelevant, meaningless, and unusable in this period. Poverty measures based on non-monetary socioeconomic indicators are more valid, but they must be based on field surveys, even if limited in scope, rather than on econometric projections.
In addition to exacerbating poverty, the present crisis has set in motion the erosion of the middle class, eating away at the standard of living and lifestyle to which they have become accustomed thanks to previous fiscal and monetary policies, in particular policies that propped up the value of the Lebanese lira. This enabled the population in general, especially the middle class, to temporarily enjoy a higher standard living disproportionate to the true value of their resources.
As for the oligarchs sitting at the top of the political, economic, and financial pyramid, they benefit the most from the system and are today taking advantage of the crisis. Even now, they are attempting to come out of the crisis by shouldering the citizenry with the cost of policies that have enriched them, still believing they can use their wealth to purchase the country&rsquo;s assets and maintain a reconstituted oligarchy based on their power.
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<a href="#sdfootnote1anc" name="sdfootnote1sym">1</a> These estimates come from Lebanese experts, the World Bank, and other bodies, largely based on mathematical projections or qualitative analyses from the press or policy papers. None of them are based on a new field survey, but the figures nevertheless seem realistic. 
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<div id="sdfootnote2" style="text-align: justify;">
<a href="#sdfootnote2anc" name="sdfootnote2sym">2</a> The source of the data is the parliamentary Banking Oversight Committee. It did not officially release the data but leaked it to the media; the data was widely used on record in the wake of the October 17 movement. The tables are included as an annex in Nehmeh (2020). 
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<a href="#sdfootnote3anc" name="sdfootnote3sym">3</a> After the 1982 Israeli invasion, Lebanon experienced a severe fiscal crisis that led to the dramatic depreciation of the Lebanese lira from 1984 to 1992. The exchange rate spiked from LBP2.5/USD1 to LBP2,800/USD1. As a result, the lira was abandoned as a savings currency and was avoided for commercial exchanges and financial and banking transactions, a situation that persisted to the present day. The US dollar is treated as an official currency in banking and commercial transactions and even in interpersonal transactions and the pricing of goods and services, although the price may be paid in lira. The price of the lira gradually began to stabilize in 1993, reaching LBP1,507/USD1 in the late 1990s, where it remained until 2019. Payments for all foreign transactions are of course made in hard currency. About 70% of the economy is dollarized. According to the April Monthly Bulletin issued by the Banque du Liban (2020), some 77% of deposits and 66% of loans are dollar-denominated. 
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