Lebanon faces significant fallout from the Ukraine conflict due to potential grain shortages and the economic impact of higher commodity prices – in particular fuel – when it can least afford it. Mired in one of the largest economic contractions in history, the heavily import dependent Lebanon must face down the prospect of higher commodity prices and a renewed collapse of the Lebanese lira. Lebanon’s economy will be negatively affected by these factors at a time when the government has proven largely unable to mitigate their impact, and is devoid of the resources to do so. This in turn will negatively affect Lebanon’s most vulnerable, with the cost of essential goods such as food and fuel disproportionately affecting the country’s poorest residents. In the context of rising humanitarian needs in Lebanon and a precarious macro-economic situation, the impact of the Ukraine conflict will exacerbate an already dire humanitarian situation, potentially prompting further political destabilization, undermining the potential for an economic recovery, and driving many more into dependence on humanitarian assistance.
Specifically, Lebanon faces the following risks:
A short-term wheat stock supply crisis due to the peculiar structure of Lebanon’s imports as well as the loss of its strategic reserve capacity, compounded by short-term market panic affecting availability.
The devastating impact of essential commodity price increases, including fuel and food.
The risk of short-term hoarding of essential goods and the rise of back market activity.
Higher import costs driven by fuel and grain price increases, potentially driving further LBP depreciation and volatility.
A further reduction in the quality of critical services such as the provision of electricity, internet, and water.
