To bolster the value of the Lebanese pound, Lebanon’s central bank said on Friday that it will relax limits on dollar purchases. The currency had just set a record low, igniting new demonstrations over increasing costs and the country’s deteriorating economy.
When Lebanon’s financial crisis emerged in 2019, the pound lost more than 90 percent of its value against the dollar. By Friday, the pound had clawed back some ground to roughly 27,200.
Prior to the crisis, which has forced a considerable section of the population into poverty, the currency traded at 1,500 to the dollar on the open market.
Following the precipitous loss, the central bank said it would remove a restriction on bank purchases of dollars made via the official Sayrafa exchange rate mechanism in reaction to the significant decrease.
In a statement, Governor Riad Salameh said, “This effort aims at reducing volatility in the currency market and enhancing the pound’s value versus the dollar.”
This procedure consists of lowering the number of banknotes in Lebanese pounds that are in circulation.”
Furthermore, Salameh said that there had been “indications” of currency manipulation, albeit he did not provide specifics.
As one expert put it, the central bank’s intervention was “like taking a Panadol pill to cure a huge catastrophe,” arguing that the government required a comprehensive reform program to address the country’s profound economic difficulties.
Economic collapse induced by a pile of sovereign debt has forced commercial banks to close their doors to depositors to the point that they are no longer accepting new deposits.
A new cabinet was formed in September, with the promise of starting to fix the economy and restarting talks with the International Monetary Fund. However, ministers have not met for three months due to a disagreement over the conduct of an investigation into a massive explosion in Beirut port in 2020, which occurred in September.
Following the precipitous loss, the central bank said it would remove a restriction on bank purchases of dollars made via the official Sayrafa exchange rate mechanism in reaction to the significant decrease.
