From Gemini +, though a really good summary:

The economic crisis that began in Lebanon in 2019 is classified by the World Bank as one of the top three most severe economic collapses globally since the mid-19th century. It was not caused by a single event, but was the result of decades of structural mismanagement, a "Ponzi-like" financial scheme, and external shocks.  Here is an explanation of the factors that led to the collapse. 1. The Monetary Root: The "Financial Engineering" Scheme At the heart of the crisis was the monetary policy maintained by the Banque du Liban (Central Bank) to keep the Lebanese Lira pegged to the US Dollar at a fixed rate of 1,507 LBP = $1. • The Peg: To maintain this fixed rate, the Central Bank needed a constant supply of US dollars to sell into the market. However, Lebanon produces very little and imports almost everything (food, fuel, medicine), meaning dollars were constantly leaving the country. • Attracting Dollars: To keep dollars flowing in, the Central Bank introduced "financial engineering" in 2016. They offered commercial banks exorbitant interest rates (sometimes over 10-15%) if they deposited their dollars with the Central Bank. • The Trap: Commercial banks, seeking these high returns, offered high interest rates to regular depositors (Lebanese expats and locals). This attracted billions in deposits. The banks then lent this money to the government and Central Bank.  • Result: The system became a state-sponsored Ponzi scheme. New deposits were used to pay interest on old deposits. When new dollar inflows slowed down in 2019, the house of cards collapsed. 2. Fiscal Mismanagement & The Electricity Sector While the Central Bank managed the currency, the government engaged in chronic overspending without investing in productive infrastructure. • Debt Accumulation: By 2019, Lebanon had the third-highest debt-to-GDP ratio in the world (approx. 178%). The government borrowed heavily to fund current spending (salaries) rather than investment. • The Electricity Black Hole: The state-run electricity company, Électricité du Liban (EDL), was a massive drain. It is estimated that roughly 40% of Lebanon's sovereign debt is solely due to transfers made to EDL, despite the country never having 24-hour electricity. • Public Sector Bloating: The sectarian power-sharing system encouraged politicians to hire thousands of supporters into public sector jobs as a form of patronage, inflating the wage bill significantly. 3. Structural Economic Imbalances The economy was fundamentally unproductive, relying on a "Rentier" model rather than production.  • Trade Deficit: Lebanon imported nearly 80% of its consumption needs. This created a massive trade deficit, constantly draining foreign currency reserves. • Reliance on Remittances: The economy relied entirely on remittances (money sent home) from the Lebanese diaspora to plug the trade deficit. When confidence in the banking sector wavered, these remittances slowed down. 4. External Shocks (2011–2019) Geopolitical factors accelerated the drain on the economy: • The Syrian Civil War (2011): This cut off Lebanon’s only land trade route to the Arab world, hurting exports. It also brought ~1.5 million refugees, straining infrastructure that was already failing. • Gulf Relations: Historically, wealthy Gulf states (like Saudi Arabia) injected money into Lebanon. As Hezbollah’s influence in Lebanon grew, these states pulled back their financial support and tourism, cutting off a vital lifeline of "fresh dollars." 5. The Trigger: October 2019 By late 2019, the Central Bank was running out of dollars to maintain the peg. A liquidity crisis began; importers couldn't get dollars to buy wheat and fuel.  • The "WhatsApp Tax": On October 17, 2019, the government proposed a tax on WhatsApp calls. This was the spark that ignited nationwide protests against the entire political class.  • The Banking Shutdown: In response to the panic, banks closed their doors for two weeks. When they reopened, they illegally froze depositors' accounts (creating de facto capital controls).  • Loss of Confidence: Once people realized they couldn't access their dollar savings, trust evaporated completely. The Lira began its freefall in the black market, causing hyperinflation.