Will the LBP 15,000 exchange rate tackle financial crisis?

News Bulletin Reports
2023-01-22 | 12:43
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Will the LBP 15,000 exchange rate tackle financial crisis?
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2min
Will the LBP 15,000 exchange rate tackle financial crisis?

The Governor of Banque du Liban (BDL), Riyad Salameh, announced last November that starting on February 1st, the rate of LBP 15,000 to the greenback would be used instead of LBP 1,500.

And this would be the first step toward unifying the exchange rates in Lebanon, a measure required by the International Monetary Fund (IMF).

At that time, the parallel market exchange rate was hovering at around 39,000 pounds per dollar.

However, now and in less than two weeks till the LBP 15,000 rate goes into effect, the currency rate on the black market has surpassed LBP 50,000.

What effects will the new rate have on the citizen?

First of all, this new rate is for banking operations.

People who previously withdrew their deposits at a rate of LBP 8,000 will now do so at a rate of LBP 15,000. However, when you withdrew money at LBP 8,000 rate, you were losing 80 percent of the value of the USD because its black-market rate was LBP 39,000. And today, you will lose 70 percent.

But as the currency continues to depreciate, your loss will revert to the same level or even more.

And if you are taking advantage of Circular 158, your $400 withdrawal in liras will become at the rate of LBP 15,000 rather than LBP 12,000. But the monthly withdrawal cap will go down simultaneously with the new decision, which will restrict the market's monetary mass of LBP.

For example, if you are allowed to withdraw S1,000 a month at LBP 8,000 rate, you will only be allowed to take $500 at a rate of LBP 15,000, according to each bank and the size of your account.

The decision of the LBP 15,000 rate, which some experts describe as 'patchwork,' is a continuation of the same approach and creation of an additional rate for the various rates: The official rate, the black-market rate, the exchange rate, Sayrafa exchange rate, and others…

As a result, the instability of the exchange rate will persist in Lebanon, further undermining investor confidence in the economy and discouraging investment when the country needs access to hard currency.

Thus, what is required is the election of a president and the formation of a government capable of putting the country on track and initiating reforms to curb the exchange rate and unify it.

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