Lebanon’s central bank governor said on Thursday that increased imports could have raised the demand for dollars in the country, noting this has pushed money changers to charge higher exchange rates.
In a televised speech, Riad Salameh also raised doubts over whether increased imports were being used for local consumption, following reports of smuggling to neighboring Syria.
“We don’t know if all of these imports are for domestic consumption,” he said.
Lebanon has had a fixed exchange rate of around 1,500 Lebanese pounds to the dollar in place since 1997.
But last week, petrol station owners and flour producers who pay importers and suppliers in dollars complained that they had to resort to much higher rates from money changers because banks were not meeting their demand.
Exchange rates on the parallel market reached 1,600 Lebanese pounds last week and it has become almost impossible to withdraw dollars from ATMs or to convert large sums in banks.
“Since June, the demand for (dollar) banknotes has increased,” Salameh said, adding that shipments of dollar notes used by money exchange houses has “doubled.”
“This (increased) demand could be domestic, from petrol station owners, flour mills, or pharmacies,” who have to pay importers and suppliers in dollars, he said.
He explained that the spike in demand is “because of an increase in imports on certain goods”, adding that it has led to a discrepancy of 1 to 3 percent between the exchange rate offered by money changers and the fixed price at banks.
The central bank on Monday adopted a measure that would allow importers of petroleum products, wheat and medicine to obtain dollars at the official bank rate to pay for key imports.
“Banks that issue letters of credit for the importation of petroleum products (petrol, fuel oil and gas), wheat and medicine will be able to ask the Banque du Liban to ensure the value of such credits in US dollars,” read the decision published by the National News Agency.
On Thursday, Salameh said that commercial banks must ensure the central bank credit lines are used exclusively to purchase imports for domestic consumption.
“This is an essential matter, not just for Lebanon’s monetary (situation) but also its reputation” and its place in the globalised economy, he added.
In August, Lebanon’s Blominvest Bank said oil imports “more than doubled” in the first quarter of 2019.
It said “the smuggling to Syria amid the rationing of oil in the country” could be among the factors leading to the hike.