The pace of the Lebanese lira’s collapse against the dollar is accelerating, after it reached over 80,000 pounds to the dollar in the last few hours. While the decrease in value is unsurprising, these large jumps in devaluation make one believe the pound is endlessly plummeting.
This idea is reinforced by the jumps the Lebanese pound made in a matter of hours, as a 3,000 LBP difference can be made between one hour and another. Just during the morning of February 15, 2023, the pound’s value dropped from 73,000 to around 77,000 pounds to the dollar.
Financial and economic experts believe that the collapse is still ongoing, and the financial situation will likely worsen unless serious action is taken by the country’s political and financial authorities. The formation of a government, the election of a President of the Republic, the implementation of the International Monetary Fund (IMF)’s conditions, along with the accompanying legislation in the banking and financial sectors are all factors that can affect the currency exchange rate.
This is a predictable outcome considering the authorities’ failure and persistence in wasting time, as well as their insistence on economic, financial, and monetary reforms. However, factors such as deliberate speculation regarding the state of the currency, continuous smuggling of goods outside the country and the ongoing printing of the currency, among others, played a role in accelerating this downfall.
The price of a dollar is rising and is expected to continue doing so due to the crisis and the political and economic conditions Lebanon is going through. The speed of that rise will depend on the Central Bank’s (BDL) intervention in the market on one hand, and on speculations between money exchangers, merchants and banks on another.
BDL is still printing Lebanese pounds and expanding the monetary block of the currency at the expense of its depreciation. The social assistance granted to employees is a result of more currency printing.
Not to forget, the banking sector’s strike made banks inaccessible to customers. This can have consequences on the confidence of citizens and raises their concern regarding the situation, further strengthening the dollar’s status as a safer currency for the Lebanese.
Some may believe that the banks’ latest escalation, used to put pressure on the judiciary attempting to try them, will reduce the demand for dollars since withdrawal operations have been reduced to a minimum – but this is highly unlikely.
The dollar rate continues to rise despite the closure of the banks, and the pressure on the Lebanese pound continues, especially after the halting of dollar-selling through BDL’s “Sayrafa” platform. An additional burden is the cessation of withdrawals from “fresh dollars” accounts, which were supplying the market with dollars sent from Lebanese expatriates to their families.
There have been several indicators recently pointing towards the acceleration of the lira’s plummet, and with the exchange rate increasing every few hours, it has become clear that the financial situation is no longer under the control of the central bank and other financial authorities.
Recent measures to keep the lira under control have included stopping and ceasing many exchange shop-owners, but in reality, these do not yield much value as the exchange rate continues to fluctuate. The most dangerous factor, however, is the increase in reasons that cause the lira to plummet further everyday.
The spare part industry has experienced a multitude of changes as a result of the lira’s fluctuation, with the lira reaching up to 80,000 LBP for every dollar on Thursday February 16, after it was previously 72,000 LBP on Wednesday February 15, before it receded back to 68,000 LBP a mere few hours later.
This fluctuation in the exchange rates is what pushed citizens to protest in front of the banks early Thursday morning. In anger, citizens chose to burn down Bank Audi’s Badaro branch, while attempting to enter other banks in Beirut and across Lebanon.
The exchange rates are yet to be unified amongst money changers, as rates tend to vary between different exchange shops. The real issue comes into practice when money changers start to hapharzly play with the exchange rate.
In situations like this, it is normal to encounter a disparity between the price of selling dollars and of buying them. Many money changers often take this as an opportunity to gain profit: while they purchase dollars between 68,000 LBP and 70,000 LBP, they will go on to sell them for over 77,000 LBP.
The chaotic market
The consumer market, including supermarkets, have been experiencing waves of chaos with the fluctuation of the lira in recent days. This was first demonstrated when the price of a loaf of bread officially reached 33,000 LBP, with supermarkets opting to sell it for 35,000 LBP, after being only 1,000 LBP pre-crisis.
Fuel has also experienced a fluctuation in price, with gas station owners demanding that fuel and diesel be priced in dollars rather than in lira. This is a measure many have come to adopt, particularly restaurants and cafes, as a means of protection against the current situation.
This chaos is not limited to the consumer market, as hospitals and pharmacies have also fallen prey. The Syndicate of Hospitals has appealed to put an index in dollars similar to what is in effect in the process of pricing medications, warning that hospitals will be exposed to financial pressures that they cannot bear.
The lira’s plummet will continue, as will the fluctuation of the exchange rate. In a country that relies mostly on imports, this is a tell-tale sign of how the consumer industry is likely to change in the coming months.