Apr 03 2020 - 14:39
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Lebanon central bank to unify parallel FX rate, let small depositors cash out

Lebanon's central bank said on Friday it was launching a Lebanon, news ,lbci ,أخبار BDL, Banks,Lebanon,Lebanon's central bank said on Friday it was launching a
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Lebanon News
Lebanon's central bank said on Friday it was launching a foreign exchange unit to centralize the price of dollars for money-changers, part of efforts to rein in the parallel market as hard currency runs short amid a deepening financial crisis.

In a separate circular, it said deposits of $3,000 or less could be withdrawn in Lebanese pounds at a "market" rate, allowing small depositors to cash out despite tight banking controls.
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The measure could relieve many Lebanese depositors who have had to stand by as the value of their savings tumbled, hit by price hikes, a weakening currency and withdrawal caps as little as $100 a week.

While neither circular defined the "market" rate, analysts said it would likely reflect the parallel market, where the pound has traded around 2,800 pounds to the dollar, nearly 50% weaker than the official peg of 1,507.5 in place since 1997.

The currency has come under even more pressure during Lebanon's coronavirus lockdown, with banks halting access to already scarce dollars.

Central Bank Governor Riad Salameh told Reuters the peg would remain in place for bank transactions and critical imports - wheat, medicine, and fuel. "We will choose the dealers with which we transact. We work on banknotes only at market rate. We buy and sell," Salameh said of the new FX unit.

Two government sources said about 60% of all bank accounts would be allowed full withdrawal. The sources said dollar deposits covered by Friday's directive amount to some $350 million.

"This is a boost for small depositors, to their purchasing power," said Nassib Ghobril, chief economist at Byblos Bank.

Ghobril said the FX measures were a "temporary" fix to address liquidity problems until the government secures badly needed foreign aid under a broad rescue plan.

Last month, Lebanon declared it could no longer pay its hefty foreign debt and launched talks with creditors.

The currency has slumped since October, after capital inflows dried up and protests erupted against the ruling elite.

Authorities sought in recent weeks to enforce a rate of 2,000 pounds per dollar on the parallel market, now people's main source of cash. Traders still sold at higher rates, with some shut down.

Friday's measures also allow paying out deposits of 5 million Lebanon pounds or less. It said this would be done by converting the funds first to U.S. dollars at the peg and then to Lebanese pounds at the day's market rate. 
 
 
 
REUTERS
 
 
 
 
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