Citizens protesting the restrictions on withdrawing deposits from banks (Hussein Baydoun)
The statements of the head of the caretaker government in Lebanon have not been dispelled Najib Mikati About the application lira exchange rate What is new once morest the dollar, citizens’ fears of deepening living and financial crises, as many question the success of the decision to officially increase the currency rate by more than eight times to reduce the gap with the black market, but the running following the dollar will continue endlessly in the absence of real policies to stop the economic and financial collapse for the country.
On Friday, Mikati went out to remove what he described as “ambiguity” in the brief statements made by Finance Minister Youssef Al-Khalil, last Wednesday, regarding the implementation of the new official exchange rate of the lira, which amounts to 15,000 pounds to the dollar instead of 1,507 pounds, indicating that the implementation of the new rate It will be gradual, and it came within the framework of the state’s efforts to standardize the many exchange rates that appeared during the financial crisis; Where the market price reached 38 thousand pounds to the dollar.
The Minister of Finance in the caretaker government launched the decision to change the official exchange rate with a brief press statement to Archyde.com, without explaining its reasons and the steps accompanying it, leaving the Lebanese in front of mounting concern regarding the worsening living conditions, before his ministry began sending explanatory statements that also remained vague and did not answer regarding Lots of people’s questions.
According to the ministry, the new exchange rate will be applied as of the first of next November, “following the House of Representatives approved the general budget for the year 2022, when it adopted the exchange rate of 15,000 pounds once morest the dollar, and following it became urgent to correct the repercussions of the sharp deterioration in the exchange rate and its plurality on finances. in order to reduce the deficit and ensure financial stability.
The ministry added that the financial and monetary authorities will work to contain any repercussions on the social conditions of the Lebanese citizen, for example, housing loans, as well as to help the private sector in an orderly transition to the new approved exchange rate.
But the caretaker prime minister told Archyde.com, on Friday, that “the statement of the Minister of Finance showed that all things would be applied in one moment. No, there will be exceptions and things that will be implemented at certain stages in order for things to be in order,” explaining that the price of 15,000 pounds will initially apply to “fees.” Customs, on imported goods, and on value added, while the rest will be done gradually through circulars and decisions issued by the Governor of the Banque du Liban that define this issue.
However, these assurances were met with a lot of skepticism, especially in light of the continued deterioration of living standards for more than three years due to the economic and financial collapse. A unified exchange rate is also one of the demands set out in a draft staff-level agreement with the International Monetary Fund in April.
exacerbating the suffering of the citizens
Economists say that changing the official exchange rate, in preparation for its unification, is a necessary step, but it is incomplete, random and unstudied, as it must come within the framework of the financial and economic recovery plan, otherwise we will be facing a new exchange rate for the dollar added to the list of loose rates, but with a “legal official” template. , exacerbates people’s suffering, increases their burdens, and hits the aid that was put in the form of increasing salaries for public sector employees and recently approved by Parliament.
First, the chief economist of the Byblos Bank Group, Nassib Ghobril, stops in his conversation with Al-Araby Al-Jadeed on the sudden announcement of a vital decision affecting many aspects of the economy through a news agency with a brief statement, at a time when people, the economy and the private sector must be prepared for such a procedure, as it was It is more useful for him to announce it, its causes, backgrounds and repercussions, whether by the president of the country or the prime minister, or through a joint press conference between the Minister of Finance and the Governor of the Banque du Liban, explaining its details and answering all questions.
He points out that we have to wait for the circulars that will be issued by the Banque du Liban related to the new exchange rate, as well as the Ministry of Finance, because people are asking regarding the effects of this on bank withdrawals, loans, taxes, official transactions, budgets and capital of companies and banks, and whether, for example, the telecommunications tariff will remain on an exchange platform that exceeds its price. The new exchange rate, or will the latter be adopted, and other questions that have not yet been officially answered.
Ghobril expects that the Banque du Liban will start issuing new circulars or amending existing ones that take into account the change. For example, in 2020, the Banque du Liban issued a circular allowing individual borrowers in dollars and foreign currencies to repay loans in pounds at the official exchange rate, which would change and be modified, as well. The amendment might include circulars setting the exchange rate of dollar withdrawals at 8 thousand pounds, which depends on the exchange rate of 12 thousand pounds, stressing at the same time that it is necessary that the amendments should take into account the situation of citizens and not harm them.
Lebanon is living in the third year of a financial meltdown, which made eight out of every ten people poor, according to the World Bank
In addition, the new price is supposed to include everything that the Lebanese state collects according to the dollar exchange rate, most notably real estate and value-added tax, according to Gabriel, pointing out that the loans granted in pounds, of course, will not change, as for those who obtained a personal loan in US dollars or housing in the currency Foreign currency and allowed by the Bank of Lebanon to be paid at the official exchange rate in pounds, this would be modified and remain determined by the Central Bank.
But the caretaker prime minister said in his statements to Archyde.com: “Nothing will happen immediately and suddenly. For example, today they say loans taken in dollars are repaid at what price? We have natural people who took loans for their housing or personal things, these prices will remain, and a period of time will be given to be repaid at 1507.” Lira” without clarifying what period of time it will continue to be applied on the basis of the old price.
Floating the lira once morest the dollar
The chief economist of the “Byblos Group” says that the change in the exchange rate comes in implementation of the initial agreement that was reached between the Lebanese authorities and the International Monetary Fund last April, within the framework of the preconditions that Lebanon must abide by to sign the three billion dollar loan. Unification of the exchange rate is one of these measures.
He believes that “what happened is just an initial step, meaning that the path will be completed with other measures. The goal is to float the exchange rate, which will subsequently cancel the official exchange rate, and we will be faced with supply and demand in the market that determines the dollar exchange rate.”
Gabriel says that the caretaker prime minister had previously said that the customs dollar rate, which was decided at a value of 15,000 pounds, will be applied until the end of this year, which means that it will be adjusted early next year, which raises the question whether this will also be accompanied by another adjustment to the official exchange rate. Or it will be fully liberalized at the beginning of the year 2023. He indicates that the International Monetary Fund prefers to float the exchange rate in one step, which is inevitably a painful decision, while the authority in Lebanon decided to gradually unify it.
For her part, Diana Monem, executive director of “Kuluna Irada”, a non-governmental organization that calls for public reforms in Lebanon, says that the decision to change the official exchange rate was not accompanied by a map of economic revival that begins to be implemented, or a new monetary policy.
Monem added to Al-Araby Al-Jadeed: “As it has become known, the unification of the exchange rate is one of the prerequisites for the International Monetary Fund to support Lebanon, and originally this is self-evident, as no economy can function in light of the chaos and the multiplicity of exchange rates in the market, but the exchange rate must be adopted. A deliberate spending within an economic vision, not to be chosen in an arbitrary, random way.
She points out that the unification of the exchange rate must be accompanied by a monetary policy capable of calming the market and an integrated financial and economic plan, otherwise this step will not be translated into the field and curb the rise in the dollar exchange rate in the parallel market.
And she continues, “The big question remains, what are the repercussions of this decision, which is clear that there is still great uncertainty and confusion in statements, even with regard to taxes and fees, and how it will reflect on commercial contracts, rents, etc., and its repercussions on banks that are already unable to respond depositors’ dollars, and how to calculate the losses that will increase in this case.”
She says: “We are waiting for the plan to restructure the banking sector amid promises that the legal framework for it will be issued this week, given that this step is very linked to restructuring and coordination is assumed according to it, and not arbitrarily, indicating accordingly that the implementation mechanisms must first be determined, and the issue harmonized.” with the restructuring of the banking sector and monetary policy.
The persistence of the black market
The Executive Director of “Kuluna Irada” organization believes that adopting the exchange rate of 15,000 pounds will not cancel the parallel black market that will remain, adding that this step remains an attempt to raise revenues for the benefit of the public treasury, including contracts for some real estate in dollars in some places, as well as collections in dollars on fees and taxes.
According to the caretaker prime minister, “from now to November 1, circulars will be issued by the Governor of the Banque du Liban and decisions specifying the rationale for this decision, and specifying the required exceptions.”
Lebanon is now living in the third year of the financial collapse, which made eight out of ten people poor, according to the World Bank, which in a report in early August accused Lebanese politicians of cruelty and opportunism, noting that “the weakening of the provision of public services came in a way It is intended to benefit a limited group at the expense of the Lebanese people.”
The World Bank added that citizens were ultimately paying double costs and receiving lower quality products or services, and the effects were also highly regressive, affecting middle and lower income segments of the population much more than others.
