Lebanon Set to Re-Peg Currency If Recovery Plan Is Approved
capitalissues.news
Monday 3rd of October 2022
Lebanon plans to slash its official exchange rate, replacing the 1,507 per dollar rate adopted 25 years ago with a rate of 15,000 in a step towards unifying numerous exchange rates, the finance minister told Reuters on Wednesday.
After saying the move would come into effect on Nov. 1, the ministry later said the step was conditioned on the approval of a plan to address the crisis, which is under discussion in parliament. The Lebanese pound has plunged by more than 95% from the official rate since Lebanon fell into financial crisis three years ago, with dollars currently changing hands at around 38,000 on a parallel market.
The Lebanese pound was pegged at just over 1,500 pounds to the dollar in 1997 to encourage investor confidence and to stall hyperinflation after its 15-year civil war. The economy has since struggled following years of conflict, political paralysis and turmoil. By late 2019 the country started to spiral into what the World Bank says is one of the worst economic crises in over a century.
“The goal is for there to be a unification of the exchange rates in Lebanon,” Finance Minister Youssef Khalil said, calling the decision a “fundamental step” in that direction. The step would come into force on Nov. 1, the ministry said.
The previous fixed exchange rate rate unraveled following a financial meltdown that started in 2019. The local currency now trades at about 38,800 pounds per dollar on the parallel market. Lebanon is looking to turn the page on a crisis labeled by the World Bank as one of the worst globally since the mid-19th century. The economic meltdown pushed three-quarters of the country’s population into poverty, with the po
In April, Lebanon reached a preliminary agreement with the International Monetary Fund on a $3 billion loan, a deal that is conditional on a series of deeply divisive reforms.
Following a staff visit to Beirut last week, the fund said that Lebanon has been “very slow” to enact the changes that have been negotiated, with most yet to be implemented.
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