Lebanon dollarises economy amid pound fall

Lebanon’s political confusion has caused the Lebanese pound to drop even further on the black market, now trading at 90,000 pounds to the dollar. This latest drop means the exchange rate is over 60 times lower than the base rate of 1,500 LBP/USD that has been in place for the past three years. As a result, the Finance Ministry has set the price of the customs dollar at 45,000 Lebanese pounds so the state treasury could pay public sector salaries. This decision has been met with fierce criticism, and economists and political experts have predicted that the Lebanese pound would soon drop to 100,000 to the dollar.

Economic observers believe that if the political class remained inactive, financial, economic, and banking breakdown was inevitable. Meanwhile, shops and supermarkets have also begun pricing products in dollars, and people have become increasingly concerned about their savings. Recently, a man stormed a Creditbank branch in southern Beirut and threatened to set it ablaze if he was denied access to his savings. The man left the bank without his money after being assured he would face no criminal charges.

The Finance Ministry’s decision to raise the customs dollar has been fiercely criticized for its likely impact on people’s purchasing power. Hani Bohsali, head of the Food Importers Syndicate, said that the decision was surprising and would increase the prices of essential commodities by 2-10 percent. Tripoli MP Ashraf Rifi warned that the local currency depreciation could result in a real catastrophe with devastating repercussions. The Council of Maronite Bishops has also expressed concerns over security and called on law enforcement agencies to tighten measures.

Lebanon is currently facing a large deficit, and increasing revenues is one of the International Monetary Fund’s demands. However, economic experts believe that the decision to raise the customs dollar and dollarize the economy could lead to immense chaos as the market prices may become difficult to control in the absence of effective state institutions. Amid the warnings of looming economic chaos and political uncertainty, the Council of Maronite Bishops has appealed to the caretaker government to discharge its duties wisely and avoid any action that would aggravate the situation.