Samson » June 12th, 2021
The Lebanese pound falls to a record level..and fears of collapse
11th June, 2021
The Lebanese pound fell on Friday to its lowest level since the Arab country gained its independence more than 7 decades ago, with the exacerbation of the political and financial crisis amid warnings of the impact of the collapse of the currency on the security situation as a result of the increasing number of poor people significantly.
On the black market, the lira reached 15,100 against the US dollar on Friday morning, compared to about 12,000 last week, and the official price reached 1,507 per dollar, while a financial expert warned that the Lebanese currency could continue its collapse to exceed 20,000 per dollar.
Experts pointed out that there are many reasons for the deterioration of the Lebanese pound, the most important of which is the erosion of the foreign reserves of the Banque du Liban (the Central Bank), the escalation of domestic demand for the US dollar, and the tendency of a large number of Lebanese to store dollar deposits in their homes for fear of local banks seizing them, in addition to the worsening political and financial crisis.
The deterioration of the lira coincided with the exacerbation of the shortage of gasoline and diesel (diesel) due to the central bank’s inability to continue providing fuel subsidies, in addition to the crisis of cutting off many medicines and foodstuffs.
The former advisor at the World Bank, Louis Hobeika, said in statements to local newspapers, “What is happening now is very dangerous, and the situation is currently different in Lebanon than it was two months ago, as it is getting worse, and people are asking for more dollars and leaving the pound,” noting that “with the increasing demand for gasoline, medicines and foodstuffs increased the demand for the dollar, which helped in the rise in the exchange rate of the dollar in the parallel market, and the difficult conditions in Lebanon.
Hobeika pointed out that the black market is now controlling the price of the dollar and that some citizens have between 5 and 6 million dollars in their homes, adding that “the dollar trade has become like selling chairs and tables, and it is not considered an illegal trade because the citizen is not obligated to buy or sell it.” Hobeika stressed that the solution to the problem of the collapse of the lira against the US dollar is primarily social-political and not monetary, and that the beginning should be by forming a government that sets a budget, initiates reforms, negotiates with the International Monetary Fund, and monitors markets.
And he warned of “the danger of not forming a government, which will continue to drag the country to collapse, and the dollar will reach 20 and 25 thousand.” He added: “All of this will reflect on the security situation, including theft and murder, and the evidence is that crimes are on the rise,” noting that the problem is that the dollar can rise and fall in the market, while the security situation, if it gets out of control, cannot be controlled.
Since the outbreak of violent protests in late 2019, the Lebanese pound has lost more than 90% of its value, causing a crazy rise in consumer prices. Lebanon has been without a government since August last year after Prime Minister Hassan Diab resigned following the catastrophic Beirut explosion and the government’s inability to reach an agreement with the IMF, while the differences between President Michel Aoun and Prime Minister-designate Saad Hariri constituted the main obstacle to forming a new government. Lebanon, with a population of about 6.5 million people, suffers from accumulated debts that exceeded $95 billion last month, making it one of the largest debtor countries in the world in proportion to GDP, while the external assets of the Banque du Liban (the Central Bank) continued their rapid decline due to spending on subsidizing commodities. imported.
BDL data on Friday showed that its foreign assets, excluding gold, fell to their lowest level in 5 years, reaching $21.6 billion at the end of last April, compared to $24.1 billion at the end of 2020 and about $37.2 billion at the end of 2019.
Lebanon is facing a comprehensive strike on the 17th of this month due to the deteriorating living conditions, which was called by the General Labor Union, which said in a statement yesterday evening, Thursday: “In light of the aggravation of the political, living and economic crisis at various levels and as a result of the unjustified continuation in the failure to form a national salvation government that opens a window. Hope for the workers and employees and for all the Lebanese people to start pulling the country out of the quagmire it has reached and the terrible decline in their lives, livelihoods, dignity, and the future of the people and the country.
He added, “This step comes as a continuation of the pressure under the slogan of speeding up and not delaying the formation of a national salvation government and dropping all flimsy pretexts and partisan and political calculations, while the country is drowning every day in a new problem and tragedy.” LINK
Source: Dinar Recaps
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