BEIRUT — The lira continued to lose ground against the dollar on Thursday, trading at LL25,200 to the greenback on the parallel market — a rate 18 percent lower than the level achieved at the beginning of March.
Here’s what we know:
• The central bank’s Circular 161, which is credited with stabilizing the national currency’s exchange rate for much of January and February, expires at the end of this month. Traders in the parallel market are speculating that given the recent escalation between the judiciary and Banque du Liban’s governor, Riad Salameh, there is a possibility the circular will not be renewed.
• Banking sources told L’Orient Today that the central bank has lowered the quotas for US dollar banknotes for all banks and that this has led some banks to reduce by 60 and 70 percent the amount of dollars they sell to personal account holders and others to strictly focus on commercial clients.
• On March 9, the lira first began to show renewed signs of depreciation when commercial banks lowered dollar quotas for clients. The central bank, however, sought to reassure the market, promptly releasing a statement saying it had made no change to its Circular 161 policy of selling dollars in unlimited quantities to the banks at the Sayrafa currency exchange platform rate.
• Gas stations went on strike Thursday, after fuel distributors priced the commodity in US dollars instead of lira. This development adds further pressure to the parallel market rate.
• Confrontation between the judiciary and the banking sector escalated last week as prosecutors moved to freeze the assets of several commercial banks and their board members, heightening uncertainty around the financial sector. In response to the rulings, the banks observed a two-day “warning strike” on Monday and Tuesday, and said they are ready to “react accordingly” if further rulings threaten the viability of their business.
• Raja Salameh, the brother of Riad Salameh, will appear today before Judge Nicolas Mansour for questioning. Raja Salameh has been held in custody since Thursday last week, when Judge Ghada Aoun announced he was being arrested for illicit enrichment. Judge Aoun has also charged Riad Salameh with illicit enrichment, but the governor did not attend the hearing scheduled for Monday.
• Riad Salameh is being summoned by the government to attend its next meeting to discuss issues related to the banking sector and the payment for Electricité du Liban infrastructure upgrades, which are said to total $77 million.
• In light of recent developments, there is increasing talk about a replacement for Salameh, who has led BDL for almost three decades. Some of the names that are being circulated in local newspapers and on social media are Camille Abou Sleiman, who served as labor minister from February 2019 to February 2020; Jihad Azour, who is a director of the Middle East and Central Asia Department at the International Monetary Fund; and Samir Assaf, a former top banker at HSBC and who is close to the French administration.
• The gap between the parallel market rate and BDL Sayrafa platform’s exchange rate has widened from 2 percent to around 8 percent since March 9. The central bank is burning through $500 million to $600 million a month to keep the national currency anchored, with current reserves currently estimated at around $10 billion.