In Lebanon, Roads are Blocked, the Central Bank Reduces Lira Exchange Rate

Lebanon’s latest political and developments take a fast and dangerous path, where political powers might be helpless in returning the country to normality.

The economic crisis might undermine all the so-called reform attempts, especially with the escalations seen in the streets in the past few days, where incendiary devices were thrown at bank representations in the cities of Sidon and Tyre. Such practices might affect the general stability with the greatest threat of an increase in the US dollar exchange rate.

The streets are on fire

Demonstrators have blocked several roads, rejecting the deteriorating economic situation, as part of a popular mobilization, despite the curfew and quarantine measures imposed to combat the COVID-19.

The National Media Agency reported that Lebanese security forces intervened to reopen some blocked highways after demonstrators set tires ablaze, blocking traffic.  The army and security forces had to intervene.

Lebanese Economy deteriorates and US dollar soars

Since last October, Lebanon has been suffering from a critical monetary crisis, amid sharp deterioration in the Lira exchange rate against the US dollar.

Last month, Lebanon announced for the first time stopping its financial solvency, with the decline of the Central Bank’s reserves of US dollars, where the Central Bank started adopting new solutions in line with the current situation.

The Central Bank has set the price of the US dollar at 3,800 liras, where money transfer companies should start dealing according to this price since April 27, compared to 3,625 Liras on April 24.

It is noteworthy that since last October, Lebanese Lira exchange rate has been falling below the official rates, set at 1,507.5 Liras, when the long-standing economic difficulties in Lebanon have become a major financial and economic crisis.

The new decision of the Central Bank was an amendment for a previous decision states by the bank on April 26, which set the price of the US dollar at 3200 liras for the banking institutions.

The Lebanese Lira recorded its lowest rates over the past week, approaching 4000 Lira against the US dollar in the parallel market, before owners of exchange companies conducted a temporary strike on Friday.

Hassan Diab, Prime Minister of Lebanon, asked the governor of the Central Bank a few days ago to clarify the Lira’s condition in light of the sharp and rapid value deterioration.

According to Reuters, the Prime Minister revealed that $ 5.5 billion were transferred from Lebanese banks within the past three months, emphasizing that the banks have become ill-liquidated.

Decision followed by another

Last Friday, the Central Bank unpegged the Lebanese Lira from the US dollar, where an exchange rate applied to money transfer companies was set at 58% less than the official price of the Lebanese Lira.

“The bank has set the Lira exchange rate at 3625 against the US dollar for all money transfer companies, as part of the first steps taken by the Central Bank under the weight of the sharp decline of the Lira, in light of the US dollar liquidity crisis which started last October,” a source in the Central Bank of Lebanon said.

The market inconsistency was obviously revealed in the official peg price with the US dollar at the banks, which is still at 1507.5 lira.

However, the dollar is only available at this price for basic imports amid a severe dollar crisis. Thus, all previous attempts to stabilize the exchange rate of US dollar have failed together with the campaigns against the exchange companies that violate exchange rates although some of them were forced to close.

All publishing rights and copyrights reserved to MENA Research and Study Center