A man counts banknotes at a shop in Beirut. (Credit: Reuters)
BEIRUT — The Lebanese lira tipped ever closer to LL20,000 to the US dollar Thursday, reaching a new record low of LL19,900 amid uncertainty over government formation and relentless worries over Banque du Liban’s dwindling foreign currency reserves.
The national currency has now lost more than one-third of its value since the start of June, and in excess of 92 percent since the onset of the financial crisis in mid-2019 when the parallel market rate first began to drift from the lira’s official peg of LL1,507.5 to the dollar.
As the lira continued to devalue Thursday, four money exchangers in Beirut contacted by L’Orient Today said they have run out of hard currency to sell. These four exchangers are buying the greenback at LL19,500 and LL19,600.
Lebanon has been without a fully empowered government for 339 days since Hassan Diab’s cabinet resigned in the wake of the Aug. 4 Beirut port explosion.
Political uncertainty affects the quantity of foreign currencies being exchanged, Mahmoud Halawi, a major exchanger and former head of the Syndicate of Money Changers, told L’Orient Today.
“Political hope is being lost day in day out. This has repercussions on citizens’ trust, who [as a result] do not easily give up their dollars,” Halawi said. This limits the dollar supply in the market at a time of high demand and sharply erodes the lira’s already diminished value.
On Wednesday, Prime Minister-designate Saad Hariri played what is widely reported to be the last card in his government formation deck — a cabinet lineup of “24 specialist ministers” — in hope of breaking a monthslong political stalemate between him and President Michel Aoun.
Hariri, who is expected to recuse himself from the task of forming a cabinet if the deadlock persists, awaits an answer from Aoun today.
Since summer 2019, the purchasing power of Lebanon’s residents has crumbled dramatically. At the current parallel market exchange rate, the minimum wage of LL675,000 per month is worth less than $34
BDL’s subsidies scheme has failed miserably to protect the lira’s market value by providing hard currencies to finance imports due to its dollar reserves being depleted to a critical level.
Moreover, without any official announcement, BDL has halted other efforts to bring some stability to the national currency. According to two senior bankers, who spoke to L’Orient Today on condition of anonymity, the central bank has not injected dollars into commercial banks to cover merchants’ imports since the start of last week. Hani Bohsali, head of the food importers’ syndicate, reinforced this point, saying the central bank has stopped selling dollars to food importers through Sayrafa, BDL’s currency exchange platform.
Aiming to stabilize the lira, the central bank started selling dollars to commercial banks in early June at an exchange rate of LL12,000 to the dollar through Sayrafa. In turn, banks were selling the dollars to importers, who were asked to provide relevant documents to justify their demand for the currency, at an exchange rate of LL12,120 to the dollar.
With the central bank now reportedly no longer supplying dollars to cover imports, merchants have turned to money exchange shops to convert their lira into dollars, placing upward pressure on the price of the limited cash dollar supplies in the market.
“Dollar demand from importers is increasing since the central bank has decreased the sum of dollars provided through Sayrafa; therefore, these importers are resorting to the parallel market,” Halawi said.