For one reason or another, the atmosphere suggests that the country is regarding to enter a new phase of collapse, more severe and difficult than the previous stages it has passed so far. Is this danger real? And what are its indications?
No sooner had the parliamentary elections ended and their results emerged, than the living situation stole the spotlight, following the loose dollar led it to a bottom it had never reached before.
But in fact, and because the dust of the electoral battle covered everything else, some did not notice that the dollar began its journey of appreciation since before the elections, and continued its upward trend following its conclusion. Is there a direct link between the elections and the dollar exchange rate?
In fact, there are a number of factors that have gathered, through which it is possible to explain what happened before the decision of the Banque du Liban to intervene forcefully, and what may happen following the decision.
First – Since before the elections, the dollar has embarked on a phase of gradual rise, prompted by the undeclared rationing initiated by the Banque du Liban to mitigate its daily losses, especially following it was forced to exceed the previous estimates it set when it decided to re-support the lira in December 2021. This increase in spending of dollars is due to the increase in credits required by importers. Consequently, the Banque du Liban resorted to reducing the daily quota of banks’ dollars. The gap between supply and demand arose, which led to the beginning of the dollar’s rise in the black market. The difference in the price between the exchange platform and the black market began to widen.
Second – An atmosphere prevailed that support for the lira would stop immediately following the elections, and that the dollar would fly immediately, which prompted everyone to buy the dollar before and following the elections.
Third – The political climate that followed the elections suggested that the horizon was blocked, contrary to the optimistic expectations. This climate of pessimism reinforced the lukewarm external reactions, while the atmosphere in the International Monetary Fund was not optimistic regarding its role. It does not seem that the Fund is planning to send a delegation to Lebanon soon to see the prevailing climate following the elections, as it seems that the officials in the Fund consider that they have accomplished their mission, and that they will wait for what the Lebanese officials will do before taking any new initiative.
Fourth – Although the Bank of Lebanon announced the extension of circular 161 until the end of July in an attempt to calm the market, this did not help in curbing the dollar’s dash, because the Central Bank did not accompany the extension decision to pump additional dollars, which kept the imbalance between supply and demand.
Fifthly – With the decrease in the volume of hard currency reserves in the Central Bank, fears of acquiring the lira increased, which increased the demand for the dollar.
All these reasons combined and pushed the dollar to soar that it approached the forty thousand pounds, before the recent decision of the Central Bank seized it.
What is noteworthy here is that the Banque du Liban has not yet pumped the additional dollars, but as soon as it announced that it would pump the green currency without a ceiling starting today, Monday, the dollar witnessed a rapid decline resulting from people rushing to sell their dollars to avoid losses or achieve profits that may result from buying back. Dollars via an exchange platform, as promised by the Banque du Liban.
The question here is, how much will the Central Bank collect from the dollars sold in the Weekend, and what losses will it bear as a result of reselling these dollars to the people?
For those who wonder to what extent the dollar will fall, they should know that the answer lies with the Governor of the Banque du Liban, Riad Salameh. Salameh had previously dropped the dollar from 33,000 pounds to regarding 22,000 pounds. Thus, the answer is simple, because Salama is able to restore the dollar to 23,000 pounds before the end of the week. But the question is not here, but rather how much he will have to pay from the remaining funds to achieve this reduction, how long this reduction can continue, and what will happen following the funds are exhausted? And most importantly of all, does Salama have the freedom to make such a decision? Was there a political party that requested or agreed to the decision to pump the remaining dollars generously? Whatever the answer, there is a disaster that will fall over people’s heads.
