Following a night of protests in Beirut as the local currency met new lows, businesses across Lebanon are closing planning weekend closures due to rapid currency fluctuations.
In response, the Minister of Industry Imad Hoballah announced on Friday it will dump fresh dollars in the economy in an attempt to stabilize the exchange rate. Also on Friday, the Syndicate of Money Changers said it would commit to selling the dollar at 3,940 Lebanese lira, local news station MTV reported.
“These administrative decisions and controls don't address the economic fundamentals,” said Nasser Saidi, former minister of Economy and Trade and Minister of Industry of Lebanon.
Central Bank Governor Riad Salameh speaking to a delegation of money changers said that there is “a sufficient amount of dollars to meet the needs of citizens, provided that we rationalize the sale and we will not sell the dollar to those who are trying to reduce the value of the Lebanese pound.”
The Lebanese lira, which is officially pegged to the US dollar at 1507 to $1, has lost over 60 percent of its value in recent months. The central bank has tried to manage the spiraling rate by setting the exchange rate at 3,850 to $1, but has done so unsuccessfully with the value reaching close to 6,000 to $1. One individual in the country’s Bekaa Valley east of Beirut reported rates closer to 7,000 to the dollar, Al Arabiya English reported Thursday.
Thread - $ in #lebanon today hit roof (in some areas reported 7,000 lira to the dollar up from 1,500). Road blocks and protests are back. CB issues orders to stick to 3850 with no clear mechanism on how to control that. Meanwhile in #syria, lira recovered some! #swing https://t.co/KxzoVvw4Bs— Sarah El Deeb (@seldeeb) June 11, 2020
Wednesday, exchange dealers were buying dollars at 4,600, Reuters reported.
One business owner, Tarek Hassan, in Batloun, a mountain town near the middle of the country, told Al Arabiya English that he had decided to close his hardware store until the exchange rate stabilized.
“When the currency goes up and down like this in a matter of hours, no one can handle it,” Hassan said.
He said that his business that employs 30-35 people would remain closed until the rate stabilizes. Businesses across the country have said they will close until the exchange rate stops fluctuating rapidly.
“There is no anchor for expectations of the future course of lira, given the collapse of the peg. [The central bank] does not have the reserves to support the lira,” Saidi told Al Arabiya English. “There is great uncertainty concerning the macroeconomic outlook, economic, fiscal and monetary policies, because none of the promised reforms have been undertaken.”
For years, the government has failed to make necessary reforms to receive much-needed foreign assistance, and informal capital controls have made it difficult to impossible for individuals and importers to access dollars in their bank accounts, which importers need to pay for goods.
Since the onset of the crisis in October, Hassan said he has not received a new shipment of supplies and materials from China, but prior to the economic downturn, he received a shipment every 30 days. The current situation has forced employees to work only part-time.
“This month I was going to pay the whole salary and be open the whole month, but now I don’t know what to do,” he said.
Compounded crises, including the further blow coronavirus has dealt to an already deteriorating economy, have left many Lebanese businesses struggling to stay afloat, with many already forced to close shop.
The country is currently facing its worst economic crisis since the end of its 15-year civil war in 1990, and recent further devaluation of the lira indicate that economic pressure will not ease soon..