BEIRUT – Lebanon’s local currency continues to travel a slippery road, depreciating rapidly in value, driving commodity prices up exponentially and contributing to worsening living conditions.
The Lebanese pound or lira is currently estimated at £60,000 per US dollar. This precipitous drop squeezed the purchasing power of citizens and took to the streets to protest against deteriorating living conditions and the ongoing economic crisis, with no solution in sight.
An economist at Al-Joumhouria newspaper Tony Farah told KUNA that the collapse that began last December was the result of a massive US dollar purchase by the Bank of Lebanon.
The move required the local money supply to expand, allowing banks to purchase around US$800 million. This expanded amount put a strain on the value of the bank itself, further accelerating the pace of deterioration.
If banks freeze this buying operation, Farrar expects the pace of depreciation to slow, prompting some stabilization within days.
Political factors such as the Beirut port survey have contributed to the depreciation of the local currency’s value, but Farrar explained that it is not really the main influencing factor.
To slow this plunge, more dollars will need to be put into the market, which the Bank of Lebanon will have to decide, but Farrar doubts the bank would be willing to do so. increase.
Financial analyst Alaa Ghanim told KUNA that any country’s exchange rate is a mirror image of its political, financial and economic policies.
However, Ghanim continued, in Lebanon it is politics that drives the economy, the latter yielding to political fluctuations and reflecting the exchange rate and thus the value of the local currency.
He pointed out that had Lebanon had a clearer picture of its economic and political policies, the vacancy of the president would not have affected the economy and living conditions so much.
Ghanim explained that the country’s current financial situation is caused by the depletion of foreign exchange reserves, and this increased demand has caused the depreciation of the local currency’s value.
In addition, the state’s failure to provide more imports and its commitment to raising public sector wages prompted the Bank of Lebanon to print more local currency and increase the lira’s currency supply. This, along with the decline in foreign exchange reserves, further devalued the lira.
Ghanim expressed concern that no breakthrough is in sight unless authorities try to chart a clear path through the economic and financial crisis.
In Ghanim’s opinion, the long-term solution lies in political stability, rebuilding international investor confidence in Lebanon, and a clear plan to be overseen by international authorities.
Lebanon will enter a presidential vacancy on October 31, 2022, following a series of unsuccessful attempts to elect a president.
Due to the Caretaker Government’s charge and limited powers, an economic plan with the reforms required by the IMF has not yet been developed.
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