(Credit: João Sousa/L’Orient Today)
BEIRUT — Lebanon’s central bank changed gears on Wednesday and extended Circular 161’s deadline by two months, until the end of July, in a bid to calm the recent sell-off of the lira.
Here’s what we know:
• The central bank has extended the circular’s expiration date one month at a time since the start of the year. Not only does today's decision deviate from the existing pattern, but it also comes earlier in the month than previous announcements.
• The objective behind this unexpected move is to calm the currency market, after the lira lost 11 percent in less than one week, trading briefly above LL31,000 to the US dollar.
• Yesterday the central bank issued a statement confirming it will continue working with the circular’s directives with no modifications and for an unspecified period of time.
• The lira’s weakness led some gas stations to close across the country as fuel prices increased. Shortages were also linked to delays in payments to importers, as banks and Banque du Liban had stopped providing US dollars at the Sayrafa rate.
• The lira immediately strengthened on the news, gaining LL1,000 to trade at LL30,200 to the US dollar. Yesterday, the Sayrafa rate averaged LL23,500 to the US dollar.
• Circular 161 was originally released on Dec. 16, allowing banks to sell dollars to depositors at the Sayrafa rate, but keeping in place the monthly lira liquidity quotas granted to banks. However, the central bank amended the circular in mid-January and removed the quotas, thus allowing banks to sell US dollars in unlimited quantities to their clients.