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Financial crisis

BDL announces a new dollar injection mechanism aimed at stabilizing the lira

BDL announces a new dollar injection mechanism aimed at stabilizing the lira

The central bank did not stipulate a rate at which commercial banks would be obliged to sell dollars gained through Sayrafa to their customers. (Credit: Patrick Baz)

BEIRUT — Banque du Liban has said that from next week it will start selling dollars to commercial banks at an exchange rate of LL12,000 per greenback. The sales will take place through Sayrafa, the central bank’s new currency exchange platform.

“BDL Gov. Riad Salameh announced that the central bank will sell dollars to banks participating in the Sayrafa platform at the rate of LL12,000 to the dollar,” the bank’s press office said in a statement issued on Thursday.

To obtain dollars at this rate, individuals and merchants must deposit cash lira at commercial banks by Tuesday, which will then be transferred to the central bank.

BDL says it will honor these purchases next Thursday by transferring the dollars to commercial banks’ correspondents abroad.

Halim Berti, a spokesperson for Banque du Liban, said the central bank commonly pays foreign currencies to banks through their correspondents abroad rather than in cash domestically.

The central bank will not provide dollars to money changers.

Moreover, Sayrafa attempts to limit who is permitted to buy dollars from either licensed exchange shops or commercial banks that use the platform’s mechanisms.

Banks are requested to prioritize selling the dollars they obtain from BDL to families of students studying abroad and importers. Both groups of dollar customers should be asked to provide relevant documents to justify their demand for the currency.

According to the central bank’s statement, these customers should register their requests at commercial banks by Tuesday in order to acquire the dollars sold to banks at BDL’s new rate.

However, the central bank did not stipulate a rate at which commercial banks would be obliged to sell dollars gained through Sayrafa to their customers.

The LL12,000 exchange rate does not apply to depositors at commercial banks, who will remain subject to a now-familiar haircut on their dollar deposits, which are withdrawable at a rate of LL3,900 up to $5,000 per month and at the official peg of LL1,507.5 thereafter.

The treatment of “fresh dollar” accounts — hard currency deposits placed at commercial banks after April 9, 2020 — will remain unchanged.

At a later stage, fresh dollar depositors will be able to sell their cash dollars to commercial banks in exchange for lira at the rate of LL12,000 to the dollar, Berti said.

The central bank unveiled Sayrafa as a currency exchange platform for money changers last week and is looking to push for its launch at commercial banks on Monday, a senior banking source told L’Orient Today on condition of anonymity.

The Association of Banks in Lebanon could not be reached for comment on Thursday afternoon.

The central bank had previously said that it would intervene in the market to absorb liquidity to support the market value of the lira “if it deems [this] appropriate and within its capabilities.”

The goal of the intervention is to lower the quantity of cash lira in the market, which remains high despite BDL’s policies to reduce the number of lira banknotes in circulation.

BDL’s latest interim balance sheet shows an additional LL1 trillion in circulation outside BDL in the first half of May, putting the total at around LL39.3 trillion. The amount of lira in circulation outside BDL is nearly six times higher now than in mid-October 2019, when hundreds of thousands of Lebanese took to the streets demanding political accountability as it became ever-more clear that the country was facing its worst financial crisis since the 1975–90 Civil War.

While an LL12,000 exchange rate appears attractive, the extent to which BDL is in reality able to provide dollars remains questionable given the bank’s dwindling hard currency reserves. These reserves are now reportedly close to a critical threshold: the mandatory level — a minimum of 15 percent of the total dollar deposits that commercial banks must keep at BDL — which caretaker Finance Minister Ghazi Wazni estimates at $15 billion.

In April, Wazni warned that the country may run out of money to fund subsidized imports, which are propped up by BDL’s foreign currency reserves, by the end of May.

The national currency has lost about 88 percent of its value since it began to deviate from the official dollar peg during the second half of 2019.

Aiming to steady the lira’s value, BDL previously injected dollars into the market via some 34 money changers at a rate of LL3,880 to the dollar. This mechanism, announced by Parliament Speaker Nabih Berri in June, aimed to push the lira value towards LL3,200 to the dollar. However, policymakers failed to reach their target after injecting “far more than $100 million into exchange offices,” according to Mahmoud Morad, the head of the Syndicate of Money Changers.


BEIRUT — Banque du Liban has said that from next week it will start selling dollars to commercial banks at an exchange rate of LL12,000 per greenback. The sales will take place through Sayrafa, the central bank’s new currency exchange platform.“BDL Gov. Riad Salameh announced that the central bank will sell dollars to banks participating in the Sayrafa platform at the rate of LL12,000 to...