Lebanese customers feel currency squeeze as dollar crisis worsens

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“Right now it’s very difficult,” Ahmad Khattab, a customer at an exchange in Beirut’s Hamra district told Al Arabiya English. “Now you go to the exchange, you say you want dollars, they say to you they don’t have dollars.”

Despite efforts by the union of exchange dealers last month to place a cap on the price of Lebanese pounds at currency exchanges, exchange dealers in Lebanon are continuing to sell at well above the officially mandated rate of 2,000 pounds to the dollar. To make matters worse, many currency exchanges are now also running low on dollars as banks impose newly-tightened restrictions on withdrawals, meaning that they are selling less greenbacks than previously and are eager to charge high prices for what they have. Worsening monetary realities in Lebanon are increasingly leaving citizens with fewer and fewer options to guarantee liquidity, and are making it even more difficult for importers to bring in goods for sale from abroad.

“Everything has been affected,” Khattab said. “Living has become much more difficult and the situation is suffocating.”

Shortly after the formation of Lebanon’s cabinet on January 21, Finance Minister Wazi Ghazni stated that it would likely be impossible to bring the exchange rate of the Lebanese pound back down to the previous peg of around 1,500 pounds to the dollar, apparently indicating that a rate of around 2,000 might be the new normal.

But rates to buy dollars at currency exchanges that Al Arabiya English spoke with ranged from 2,100 to 2,270, and half of these currency exchanges stated they had no dollars to sell at all. Nemr, a student at the American University of Beirut, told Al Arabiya that he has witnessed some currency exchanges closing down entirely.

Alex, a shop owner in Hamra, said the tightened withdrawal limits coupled with currency exchanges’ inability to sell dollars in some instances have created an unsustainable situation.

“Sometimes you go to the exchange shop and you want to buy a big quantity of dollars, they don’t sell [it] to you,” he told Al Arabiya English. “Since you cannot also have access to dollars from your bank, banks have capital controls and very big restrictions on the withdrawal of dollars, it’s creating a huge problem, and it’s creating a secondary market which is going crazy.”

Alex added that his business has suffered since the beginning of this year, and told Al Arabiya English he has had to cut spending down dramatically. He said he is now in “survival mode.”

Samia Abou el-Hassan, a consultant in Beirut who was able to buy dollars at a currency exchange, told Al Arabiya English that as the availability of dollars has diminished further in recent months, she has seen some imported goods disappear.

A man stands near a broken facade of a bank in Beirut, Lebanon, January 15, 2020. (Photo: Reuters)
A man stands near a broken facade of a bank in Beirut, Lebanon, January 15, 2020. (Photo: Reuters)

“There are a few things I used to get in the supermarket that I don’t find anymore,” Abou el-Hassan said. “Stuff like the butter I used to buy, it’s not available anymore.”

“When it comes to the currency exchange and the scarcity of US dollars, one had to keep in mind that Lebanon relies very heavily on imports,” Sami Nader, the director of the Levant Institute for Strategic Affairs, told Al Arabiya English. “Practically all its productive sectors rely on imports in one way or another. That means whatever affects the currency value will affect the whole economy.”

Nader stated that banks are increasingly rationing dollars because the outflow of US currency is greater than its inflow in Lebanon. The practical effect of such rising scarcity, Nader said, falls largely on the lower class.

“The purchasing power of the citizen, and namely the poor, has diminished by 40 percent to 50 percent,” he stated.

Nemr, the AUB student, said it was only a matter of time before the Lebanese workforce becomes decimated by the ongoing monetary crunch.

“The people that get money in Lebanese currency, eventually they will be on the streets,” he said.

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