Lebanon Vows to Stabilize Currency After Night of Angry Protests
Lebanon’s top officials vowed to take measures to strengthen the pound against the dollar after nationwide protests over deteriorating living conditions reignited, piling pressure on the government to act.
Angry demonstrators used burning trash and tires to block major highways as hundreds gathered in the capital, Beirut, and its suburbs late Thursday. Prime Minister Hassan Diab convened an emergency cabinet meeting on Friday to discuss the country’s financial situation as reports swirled over the possible sacking of central bank Governor Riad Salameh. The slump in the value of the pound has sent prices of everyday essentials surging.
The government will take steps to lower the pound’s exchange rate, and it should drop below 4,000 per dollar starting next week, House Speaker Nabih Berri told reporters after meeting with Diab and President Michel Aoun. The aim is to bring the rate back to 3,200.
Asked whether sacking Salameh was discussed by top officials, Berri said Lebanon couldn’t afford to lose the longtime governor.
“Right now, we need everyone and we don’t need to let anyone go,” the speaker said.
The Syndicate of Money Changers in Lebanon said it would comply with central bank orders to ration dollar selling and take stricter measures to help reduce the rate. The central bank would inject more dollars into the market, Mahmoud Halawi, a member of the union, said.
On the streets, the currency changed hands at 5,000 per dollar on Thursday, from about 4,000 over the past week, as a shortage of hard currency deepens and prices of food soar. That compares with an official peg of 1,500 that’s effectively only in place for essential goods.
The central bank is already struggling to support the import of essential goods such as wheat and medicine. Diab said last month that the monetary authority would assist in the importation of food to help contain prices. Lebanon heavily relies on shipments from abroad for almost all of its needs, from raw materials to foodstuffs.
Three months after defaulting on $30 billion of Eurobonds, the government is still hashing out a deal with the International Monetary Fund to secure a bailout. A rescue plan approved by the government in April faces resistance from banks, and will likely come too late for many of Lebanon’s most vulnerable.
Exchange bureaus, in agreement with the central bank, have been setting the price of the pound against the dollar for the past week, and it reached 3,940 on Friday. Protesters have said though that the black market is operating at a much higher rate, and some unverified reports on social media indicated the pound had reached 6,000.
The central bank governor said Thursday that such reports were misleading the public. He referred to a circular a few days ago that asked money changers to buy dollars from the central bank at 3,850, with a plan to reduce the rate to 3,200 over the coming weeks.
Diab has asked the central bank to inject dollars into the market to stabilize the pound. The bank has been buying U.S. currency coming through electronic money transfers outside of the formal banking sector at a market price in an attempt to stabilize the unofficial rate.
The premier has blamed Salameh for the currency crash, suggesting that the governor was not doing enough. This came after food prices surged by at least 60% since October, when protests first erupted over corruption, unemployment and worsening living standards.
©2020 Bloomberg L.P.