The World Bank released its Lebanon Economic Monitor (LEM) report titled “Lebanon Sinking (To the Top 3)” in which it showcases Lebanon’s major economic developments and policies over the past six months. In details, the report commented that Lebanon’s prevailing financial and economic crisis would most probably rank amongst the worst 10, possibly worst 3 (Top 3), global crises since the year 1857, with GDP freefalling from $55 billion in 2018 to $33 billion in 2020, a 40% drop in GDP per capita, a rate which is usually prevalent in war-torn countries. The report commented that Lebanon has been facing a triad of crises over the last year, namely the aforementioned economic/financial crisis, the COVID-19 pandemic and the Beirut Port explosion, and yet the response has been “inadequate”. This inadequacy, according to the report, is mainly attributed to the absence of a political consensus over corrective policy measures, rather than due to knowledge gaps. The World Bank warned that the already dire social situation could turn disastrous, with more than half the population likely below the poverty line given that the majority of the labor force is being paid in the local currency. In figures, the report revealed that 41% of households are encountering difficulties in securing basic needs, with the percentage of people facing challenges in accessing health services increasing from 25% in July-August to 36% in November-December and the unemployment rate rising from 28% (pre-COVID) to 40% by end of year 2020 according to a survey by the World Food Program. On the exchange rate front, the report uncovered that the World Bank Average Exchange Rate (AER) has depreciated by around 129% in 2020, resulting in soaring inflation levels that averaged 84.3% in 2020 and a 129% expansion in currency in circulation notwithstanding the drop in bank deposits. The World Bank estimated real GDP growth to have contracted by 20.3% in 2020, having also shed 6.7% in 2019, with the COVID-19 pandemic being a major culprit in this deterioration via its devastating effect on the tourism sector (71.5% annual drop in tourism arrivals during the first five months of 2020). The performance of the construction and real estate sectors was no exception, with construction permits and cement deliveries deteriorating by 26.9% and 44.7% respectively on an annual basis during the first 10 months of 2020. The aforementioned GDP contraction was fueled by a 45% drop in imports with the World Bank estimating the current account deficit to have shrunk by 10 percentage points to attain 11% of GDP in 2020, as opposed to an average of 22.5% over the 2013-2019 period. The World Bank also commented that the tightening of the budget deficit actually masks an actual deterioration, with revenues dwindling severely as a result of the economic contraction, and the lower expenditure levels stemming from lower interest payments on foreign debt (Eurobond default) and local debt (modified terms with BDL). In figures, the report commented that while the fiscal deficit has improved by 0.7 percentage points to attain -4.9% of GDP in 2020, the primary balance deteriorated by 2.3 percentage points to reach -2.8% of GDP. The report commented that Lebanon needs to promptly ratify and implement a credible, comprehensive and coordinated macro-financial strategy that centers around a debt restructuring program, improving the solvency of the financial sector, adopting a new monetary policy framework that aims at restoring confidence in the exchange rate, a phased fiscal adjustment, reforms that ameliorate growth and better social protection. The report compared Lebanon’s crisis with 100 crises (63% of which occurred in advanced economies and 37% in emerging economies) observed over the 1857-2013 period under two scenarios, a good scenario and a bad one. Under the good scenario, Lebanon’s crisis ranked sixth globally after the Australian crisis in 1893, whereas under the bad scenario Lebanon’s rank would deteriorate to the third position, just ahead of the Chilean crisis in 1926 and the Spanish Civil War. The report also entailed two special foci, with the first Special Focus examining Lebanon’s FX subsidy and the second Special Focus covering the impact of the prevailing situation on four essential public services namely, electricity, water supply, sanitation and education. As far as the first Special Focus is concerned, the report commented that the prevailing FX subsidy is distortionary, expensive ($287 million per month) and regressive (working mainly for the benefit of the wealthier tranches of the population). In figures, the report uncovered that at present, 50% of the FX subsidy is being channeled towards energy items which are regressive since high-income earners are likely to consume more fuel, with the poorest 20% receiving 6% of the subsidy and the richest 20% of the population benefiting from 55% of the subsidy. In addition, the World Bank commented that inflation is mainly affecting the poor segments of the population, particularly pensioners and those with fixed income, with the prices of food and non-alcoholic beverages increasing by 254.3% in the year 2020 and the prices of clothing and footwear rallying by 289.8%. Accordingly, the World Bank recommended replacing the FX subsidy with a cash transfer program in an endeavor to bolster Lebanon’s balance of payments (by $1.7-$3.2 billion), markedly extend the runway till the depletion of BDL’s remaining reserves and reduce the impact on the country’s poor and middle class.  Always in the same vein, the report warned, however, that eliminating the costly subsidy would increase inflation by around 24% in a direct manner, and accordingly recommended a phased approach towards subsidy removal. In details, Phase 1 entails subsidy removal on the Ministry of Economy and Trade’s essential items and fuel (except for EDL), with Phase 2 involving the elimination of the EDL subsidy and Phase 3 centering around eliminating subsidies on medication. As far as the second Special Focus is concerned, the World Bank commented that the foreign currency liquidity squeeze is jeopardizing private sector contracts for power plant maintenance and that EDL’s revenues are shrinking due to technical and non-technical losses, possibly leading to increased electricity blackouts. Concurrently, the report uncovered that the Water Establishments are facing difficulties in terms of financial and human resources, driving people to rely on costlier alternatives, while also commenting that a deterioration in sanitation services would have an adverse impact on public health. When it comes to the education sector, the World Bank report revealed that the prevailing crisis has led to the migration of some 54,000 students (11% of public sector students) from private sector schools to public sector schools, as well as to higher levels of student dropout rates especially within marginalized communities. Finally, and always on the education front, the report unveiled that the COVID-19 pandemic has cost students a lost year of learning.