The devaluation of Lebanon’s currency, for the first time in 25 years, has resulted in a significant shortage of local currency. This has urged lenders to search for Lebanese pounds, further aggravating the situation in a country where bankers are on strike. Moreover, there’s a crackdown on exchange shops.
Sources claim that the central bank, also known as Banque Du Liban or BdL, is trying to combat a more drastic depreciation. To achieve this, BdL is reportedly limiting access to local currency. Meanwhile, it also reduces the amount of US dollars it supplies through its Sayrafa foreign-exchange platform.
Bank devaluation triggers soaring interest rates and currency demand
As stated by two anonymous sources, the interest rates that lenders charge one another have increased dramatically. Its rates are soaring to as high as 55% this week. This is due to lenders trying to terminate their foreign-exchange positions at the central bank following its 90% devaluation in February.
There’s a surge in demand for Lebanese pounds as customers scramble to pay off their dollar loans. These loans were taken out before the devaluation of local currency at a much lower exchange rate.
Based on BdL’s daily summaries, trading volume on Sayrafa, mainly used by banks and licensed foreign exchange bureaus, plummeted from $300 million to a mere $15 million in a single day.
Black market dollar reaches record high as supermarkets price in dollars
This is the most recent update on the financial crisis, deemed as one of the most severe globally since the mid-1800s.
Almost two years ago, Lebanon failed to meet payments on $30 billion of its international debt. This led to acute economic decline, triple-digit inflation, and a currency crash, evaporating people’s life savings.
Despite the central bank’s efforts to regulate the official exchange rate to 15,000 pounds per dollar, the US dollar’s value on the black market continues to increase. The currency reached an all-time high of approximately 80,000 pounds this week.
This has wreaked havoc on local businesses and supermarkets. The government is allowing them to price products only in dollars in order to protect their profit margins.
Amin Salam is Lebanon’s caretaker Economy Minister. He has declared that supermarkets will use the average rate of the black market for all products. However, locally produced goods are an exception. Salam claims this is the only way to safeguard consumers in light of the current crisis.
On top of this, people set fire to several bank branches in the capital city of Beirut. Thus, they expressed their frustration with the ongoing strike.
