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A look into Lira collapse during current crisis

Lebanon Economy

2023-02-17 | 10:04

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A look into Lira collapse during current crisis

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The exchange rate of the dollar doubled from roughly forty thousand LBP at the start of 2023 to mid-February, or in just one and a half months, and is now worth more than eighty thousand LBP.

The biggest devaluation of the Lebanese lira against the US dollar since the rise in exchange rates began is currently happening.

The dollar doubled in price from the beginning of February 2022 from around 20,000 to 40,000 by the end of 2022, an increase of 20,000 LBP.

Between January 2023 and mid-February 2023, a mere month and a half, the price of a dollar doubled, from forty to more than eighty thousand LBP.

This increase is a sign that we are entering the most dangerous phase, which will last and leave the dollar exchange rate uncapped and open.

The following causes continue to drive up the value of the dollar:

- The Banque du Liban is buying dollars through companies and driving up demand in order to secure the salaries of the public sector on Sayrafa platform as well as other expenses in dollars for the government.

- Private banks are also purchasing dollars from the illegal market to improve their dollar capital.

- In order to safeguard their imports and business, merchants are, of course, securing money in dollars from the market.

The major factor is still the persistently high demand for dollars in contrast to their finite supply, which is brought on by the citizens’ unease, political unrest, a power vacuum, and a lack of reforms and agreement with the International Monetary Fund.

Due to these considerations, many anticipate a continued, sharp increase in the value of the dollar as well as a further decline in the purchasing power of the average citizen. They also mentioned that between 1983 and 1992, the dollar's exchange rate increased 1000 times, from 3 to 3000 pounds.

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