Two banking sources and a businessman with several outlets in the country confirmed to L'Orient-Le Jour reports circulating yesterday on instant messaging groups that bank card payments in bank dollars or "lollars" would be permanently stopped. These terms refer to the currencies blocked in the banking system by the restrictions unilaterally put in place by the banks from the first months of the crisis in 2019. Payments in dollars will now only be able to be made via cards linked to "fresh funds" accounts, which contain currency not subject to restrictions.
According to one of the banking sources contacted, Banque du Liban took this decision in response to a request from companies managing payment solutions in Lebanon, which had pointed out the "low volumes" of card transactions funded by bank dollars. The decision was reportedly made about a week ago, but no circular has yet been issued by the central bank, whose press office could not be reached late yesterday afternoon. According to the business source, companies that were still accepting card payments in lollars were recently notified of the decision.
"The operator I work with stopped processing lollar payments yesterday in my outlets, but I don't know if the situation is widespread. Other banks notified us of this decision later today. It's quite a shame, because we were still accepting this preferred means of payment by people who had currency stuck due to the bank restrictions," he added.
He fears that this measure will have the effect of further boosting inflation, as holders of these blocked currencies will have no legal choice but to withdraw them in lira at the rate of LL8,000 to the dollar imposed by the BDL via circular No. 151. Once converted into lira, these amounts can be withdrawn either in the same currency or in dollars at the rate of the Sayrafa platform, which stood at LL25,400 to the dollar yesterday, compared to nearly LL30,000 on the open market.
Another option is to exchange lollar checks for cash on the informal market that has sprung up, suffering a violent discount in the process (currently around 87 percent, compared to around 25 percent for lira checks, according to information circulating among insider groups).
"With the suspension of lollar card payments, these discount rates will increase further," fears the business leader.
Since the beginning of the crisis in mid-2019, BDL has increasingly reduced the limits for card withdrawals and payments, whether in lollars or subsequently in lira, and this in an effort to reduce runaway inflation (211.43 percent in May).
This article was originally published in French in L'Orient-Le Jour.