Lebanon mixes multiple exchange rates

The economy of Lebanon is collapsing, and a variety of exchange rates for the local pound have emerged, causing difficulties for personal accounting and hindering the fulfilment of a reform requirement set by the International Monetary Fund (IMF). In February, the government’s official exchange rate was set at 15,000 pounds to the US dollar, which was nearly 90% devalued from the long-time peg of 1507.5. The Central Bank is selling dollars at a rate of 79,000 to the greenback, while the finance minister plans to calculate tariffs for imported goods at 45,000 pounds.

The parallel market rate is currently hovering around 107,000 pounds and changes daily. Supermarkets and fuel stations are required to post signs with the value they have adopted for the day, but the rate changes so fast that many are pricing in the relatively stable US dollar instead.

To solve the exchange rate confusion, the government needs to implement a unified exchange rate. This is among the pre-conditions set by the IMF nearly a year ago for Lebanon to receive a $3 billion bailout. However, the lender of last resort says that reforms have been too slow and have met resistance from politicians who are shielding vested interests and dodging accountability.

In the meantime, the country has been moving towards a cash-based and dollarised economy due to spiralling inflation and bank restrictions on transactions. Shop owners have to pay in US dollars to import goods but sell in Lebanese pounds. The exchange rate is changing so fast that businesses are losing money overnight. The varying rates across sectors are making personal accounting “messy” for Lebanese, and unifying them is more urgent than ever, said one economist.