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FINANCIAL CRISIS

Central bank continues fruitless efforts to contain lira's slide

Central bank continues fruitless efforts to contain lira's slide

(Credit: Joseph Eid/AFP)

BEIRUT — The central bank may have lost another LL6 trillion in May trying to stabilize the national currency, which on Wednesday continued to trade on the parallel market at a rate indicative of Banque du Liban’s continued failure to achieve its intended alignment of its Sayrafa platform exchange rate with the parallel market rate.

Here’s what we know:

The central bank released on Wednesday its balance sheet dated May 31, which revealed that the amount of lira in circulation outside of the central bank has increased by LL2.7 trillion to LL43.5 trillion since mid-May. This sizable increase explains the lira’s sudden slide in the last two weeks. The more money the central bank prints, the lower the value of the lira as the currency’s supply outstrips demand.

The balance sheet also showed that the amount of foreign currency Banque du Liban holds has dropped by $234 million since the beginning of the month, but most importantly it showed that the central bank may have lost LL6 trillion last month trying to stabilize the currency.

The lira has traded on the parallel market between LL29,000 and LL32,000 to the US dollar since the beginning of the week. These levels are LL4,000 to LL5,000 weaker than the rate recorded by BDL’s Sayrafa platform, LL24,500.

After the central bank’s announcement late Friday afternoon calling residents and companies to head to banks starting Monday to exchange unlimited quantities of lira banknotes to US dollars at the Sayrafa rate, the exchange rate strengthened to under LL27,000 from an all-time low of LL37,700 before dropping again to above LL29,000 to the US dollar.

Sayrafa reports released daily by the central bank showed the total traded amounts on the platform at $196 million on Monday followed by $105 million on Tuesday and $124 million on Wednesday.

Bankers confirmed to L’Orient Today that the central bank has maintained its dollar quotas per bank and in turn banks have imposed monthly dollar exchange limits on their clients of between $2,000 and $4,000. These limits run contrary to the central bank’s announcement that it is selling US dollars in unlimited quantities.

Bankers also told L’Orient Today that they are prioritizing the payment of salaries in US dollars, before processing the applications of clients with lira banknotes.

Some banks are charging a 5 percent commission on exchange transactions, while others are asking clients to set aside between 10 and 20 percent of the total lira and place it into an account.

The central bank released a statement Wednesday afternoon instructing banks not to delay executing the clients' conversion requests nor to charge a commission or block a percentage of the transaction amounts.



BEIRUT — The central bank may have lost another LL6 trillion in May trying to stabilize the national currency, which on Wednesday continued to trade on the parallel market at a rate indicative of Banque du Liban’s continued failure to achieve its intended alignment of its Sayrafa platform exchange rate with the parallel market rate.Here’s what we know:The central bank released on Wednesday...