Lebanon has been in the midst of an economic crisis since 2019, exacerbated by the COVID-19 pandemic. The country’s currency, the Lebanese pound, has lost more than 90% of its value in less than two years. Inflation has skyrocketed, and the poverty rate has surged. The situation has been compounded by political instability and corruption, leading to a loss of confidence in the banking system.
The country’s central bank, Banque du Liban, has been struggling to maintain the value of the Lebanese pound. In an effort to stabilize the currency, the central bank introduced an exchange platform called Sayrafa in late 2020. The platform allowed customers to buy and sell U.S. dollars at a fixed rate of 3,900 Lebanese pounds per dollar, which was significantly lower than the black market rate.
Central Bank Governor’s Announcement
On March 1, 2021, the governor of Lebanon’s central bank, Riad Salameh, set a new rate for Sayrafa at 70,000 Lebanese pounds per dollar. However, the rate has steadily increased, trading at 83,500 on the platform on Monday.
To combat the currency devaluation, Salameh announced on Tuesday that the central bank will begin selling unlimited amounts of U.S. dollars. He also set a new rate for Sayrafa at 90,000 Lebanese pounds per dollar.
This move by the central bank comes after weeks of protests and unrest in Lebanon over the deteriorating economic conditions. The announcement was made in an effort to restore confidence in the country’s banking system and halt the rapid devaluation of the Lebanese pound.
Impact on the Economy
The devaluation of the Lebanese pound has had a significant impact on the economy, with inflation hitting record highs and basic necessities becoming increasingly expensive. The move by the central bank to sell unlimited U.S. dollars is aimed at reducing the demand for foreign currency and stabilizing the exchange rate.
However, some experts believe that the move could have negative consequences in the long term. Lebanon’s foreign reserves have been depleted, and selling unlimited U.S. dollars could further deplete the central bank’s reserves. This could lead to even more economic instability and a potential currency crisis.
Lebanon’s currency crisis has had devastating effects on the country’s economy and its people. The central bank’s announcement of unlimited U.S. dollar sales is a step towards stabilizing the currency and restoring confidence in the banking system.
However, the long-term effects of this move remain to be seen. The country’s economic woes are deeply rooted, and a sustainable solution will require significant structural reforms and international support.