Lebanon’s central bank is taking drastic measures to combat the spiralling devaluation of the Lebanese pound. On Tuesday, Governor Riad Salameh announced that the bank will begin selling unlimited amounts of US dollars. The move comes as the exchange rate on the central bank’s platform, Sayrafa, has steadily risen to 83,500 Lebanese pounds per dollar on Monday, up from 70,000 on March 1.
The Current Economic Situation in Lebanon
Lebanon is currently facing one of the worst economic crises in its history. The country’s currency has lost more than 90% of its value since 2019, resulting in skyrocketing inflation and widespread poverty. The crisis has been exacerbated by political instability, corruption, and the COVID-19 pandemic.
The Lebanese government defaulted on its debt in March 2020, and negotiations with the International Monetary Fund (IMF) for a bailout package have stalled. The country’s banking sector, which was once a key pillar of the economy, has also been hit hard by the crisis, with many banks imposing capital controls and limiting withdrawals.
The Central Bank’s Measures to Combat Currency Devaluation
The central bank’s decision to sell unlimited US dollars is aimed at stabilizing the exchange rate and stopping the devaluation of the Lebanese pound. Governor Salameh set a new exchange rate of 90,000 Lebanese pounds per dollar on Tuesday, up from 70,000 on March 1.
The move is expected to inject much-needed liquidity into the market and ease the shortage of US dollars, which has been a major factor contributing to the currency crisis. The central bank has also promised to crack down on currency speculators and black market traders, who have been exacerbating the crisis by hoarding US dollars and driving up their value.
Criticisms and Concerns
While the central bank’s decision to sell unlimited US dollars has been welcomed by some as a necessary step to stop the currency crisis, others have raised concerns about the potential consequences of the move.
Critics argue that the move could lead to hyperinflation and further erode the confidence of investors in the Lebanese economy. Others have pointed out that the central bank’s move is only a short-term solution to a much larger problem, and that a comprehensive economic reform plan is needed to address the underlying issues.