The value of the Lebanese pound against the dollar remained stable from 1997 until October 2019. That is, 1507.5 liras for one dollar. But with the worsening of the economic crisis a year and a half ago, the currency lost its value rapidly, losing between 80% to 90% of its price compared to the dollar.
In a report published by the American “Foreign Policy” magazine, writer Anchal Vohra says that the Lebanese citizen has become living a bitter reality due to the collapse of the price of the pound against the dollar, and is paying the price of a crisis resulting from the incompetence of the political and financial elite and the rampant corruption in the state.
A number of experts say that the savings of the Lebanese are being used to reduce bank losses, and to preserve the privileges of the elite and their ability to access liquidity. Simply bailing out the rich at the expense of the average citizen.
In order to avoid the mass rush to banks to withdraw dollars, the Lebanese were prevented from withdrawing the dollars deposited before the economic crisis, and they were only allowed to withdraw the Lebanese pound. But at lower prices than the market.
The central bank allowed the withdrawal of funds, but at a price of 3900 pounds per dollar, even with the high exchange rate in the market, as it reached 15 thousand pounds to the dollar during the past month, and the price has stabilized between 11 thousand and 11,500 pounds to the dollar until last week, while the central bank set a new exchange rate In banks, the amount of 6,240 Lebanese pounds per dollar.
According to the author, the peg to the US dollar was a risky choice from the start. Because Lebanon imports most of its needs from abroad, and exports only a few products.
With the escalation of government and central bank debts in 2019, depositors began to lose confidence, and the deposits of expatriates, whose remittances were the main source of foreign currencies, declined, and the Lebanese began to take to the streets to protest the deteriorating economic situation.
The poor pay the bill
With the onset of the collapse, large depositors were able – in the absence of legal deterrent mechanisms – to transfer their money to Swiss and French banks, while small depositors had their accounts frozen, or had to withdraw their money with great losses.
In this regard, a senior banker to Foreign Policy admitted, on condition of anonymity, that the wealthy had used their political connections to transfer their money abroad, and added that banks had imposed strict capital controls aimed at stopping the financial collapse. Banks to transfer money abroad.
Mohamed, a Lebanese banker working in the capital (Beirut), emphasized that mercury exchange rates are burdening the average consumer and amount to what could be considered indirect theft. And Mohamed sends messages to those who hide their dollars, and wanders the streets of Beirut on his motorbike, with large sums in his bag in Lebanese pounds, to provide a cash delivery service.
Muhammad receives a small commission for every exchange transaction, and delivers dollars to the owner of one of the supermarkets, who transfers them to suppliers abroad to import the goods. Later, the supermarket sells his imported goods to consumers at high prices, even though they withdraw their money from banks at a value of 3900 pounds against the dollar.
Nizar Ghanem, a Lebanese economist and director of the research firm Triangle, says that the cost of the financial crisis is deliberately casting on vulnerable groups, adding that the central bank is deliberately allowing the sale of dollars at multiple exchange rates.
For his part, Khaled Zidan, Chairman of the Board of Directors of the National Credit Bank, believes that banks have become a target for the demonstrators. But it is also suffering from losses, and he added that banks in general are among the biggest losers during the current crisis, given that their capital is in Lebanese pounds, and thus their value has decreased significantly. But Zidane admits that the current exchange rate – that is, 3900 pounds to the dollar – allows banks to trim their losses.
Despite the popular protests, the collapse of the economy, and the explosion of the Beirut port, there has been no fundamental change in the policies of the ruling class, as the government has so far failed to present a coherent fiscal and monetary plan to extricate the economy from its crisis, and the reforms demanded by the International Monetary Fund in order to provide A loan that helps revive the Lebanese economy.
A dilemma for the international community
According to the author, the international community is in real trouble, as it cannot provide aid and loans to the government without carrying out the required reforms. But at the same time, it cannot stand idly by and let the Lebanese people suffer the ravages of poverty and economic collapse.
According to United Nations statistics, more than 55% of the Lebanese are suffering from poverty and are struggling to secure the necessary goods in 2020, compared to 28% in 2019.
In order to solve this dilemma, the World Bank decided to provide $ 246 million in aid to the poorest groups in Lebanon. But the Central Bank’s decision to set the exchange rate of those aid at 6,240 pounds to the dollar; Any half of the market price, sparked a wave of anger.
The Lebanese Central Bank justified this move by its desire to use part of the aid to subsidize the prices of flour, fuel and medicine. However, many activists believe that the support has become merely a tool used by the corrupt ruling class to control the street and absorb the anger of the Lebanese, and it is also used to support regional allies.
Independent activist, Sami Nader, says that fuel subsidies are being used to smuggle fuel into Syria and support the regime of President Bashar al-Assad, adding that the subsidies are not used to help the poor. They serve the traders and smugglers who smuggle fuel into Syria, and of course the powers that protect them. So the best way to support poor people around the world is direct cash transfer.
In light of the collapse of the lira, the price of foodstuffs increased by 400%, and the price of bread and vegetables doubled, and this exacerbated the sectarian division in the country and deepened the differences and crises between the Lebanese and the Syrian refugees, according to the author.
The Corona pandemic also severely affected the tourism sector, which before the outbreak of the epidemic was one of the few sectors that maintained its balance despite the decline of the Lebanese economy as a whole.
In light of this tragic reality that most Lebanese live in, and only the wealthiest group has escaped from it, political parties are still struggling over ministerial positions, which delayed the formation of a new government, and this means – according to the author – that no one has the authority to implement the reforms that the country needs and develop An end to the tragedy of the Lebanese people.