The Lebanese currency has hit a new record low, sparking furious protests in the crisis-stricken country, with the greatest unrest since the outbreak of the pandemic.
The pound has fallen 20 percent since the end of last year, hitting L £ 10,000 against the US dollar in black market trading on Tuesday before falling back to around L £ 9,975. It is now about 85 percent below the country’s official exchange rate.
The currency’s collapse means that a minimum wage of L £ 675,000 a month is now worth only $ 67.50, while the devaluation has sparked rampant inflation in the import-dependent country, even as the shrinking economy is cutting jobs and workers are more likely to undergo wage cuts in place of pay increases.
Protesters burned dumpsters and blocked roads in the capital, Beirut and in cities across Lebanon on Tuesday, in a show of nationwide frustration not seen since the massive anti-government protests that broke out in October 2019.
Coronavirus “pushed people out of the street. But now there’s a bounceback,” said Sami Nader, director of the Levant Institute for Strategic Affairs. “Because it added to the prevailing frustration. And now they are more desperate.” ”
Haunted by alleged official corruption and mismanagement, Lebanon was economically weak long before the August 4 blast at Beirut port devastated the capital, killing more than 200 people.
The explosion caused the government to fall under Prime Minister Hassan Diab. But an ongoing political crisis has left the country with its cabinet in the role of caretaker, leaving much-needed bailout talks with the IMF on ice and the country without a financial bailout. Lebanon defaulted on its external debt a year ago, while its local banks are trapped in a liquidity crisis, making it nearly impossible for the state to borrow money.
Exacerbated by coronavirus-related lockdowns, the economic situation in the import-dependent economy shrank by nearly a fifth last year. A banking crisis has largely blocked access to their money for customers who have withheld their savings in US dollars.
Deteriorating living conditions fuel anger. Government statistics registered a 400 percent year-over-year increase in average food and non-alcoholic drink prices for December, and the World Bank estimates that 45 percent of the population now lives below the poverty line.
Lebanon had pegged its currency at a rate of about L £ 1,500 to the dollar since 1997, in an effort to create economic stability after the civil war that ended in 1997. It boosted Lebanon’s purchasing power and earned praise for the Lebanese governor of the power plant. bank, Riad Salame.
But the peg came loose in late 2019, with black market currency trading at L £ 9,600 in July 2020 – before dropping further this week.
“Given the free fall of the long-standing peg, expectations of the future value of the Lebanese pound remain unchecked,” said Ehsan Khoman, Head of Emerging Markets Research Emea at MUFG. He added that while reforms would be difficult, “the crisis has become so complex that far-reaching measures are now needed”.
Neighboring Syria’s currency also hit new lows of S £ 3,750 per dollar. It marks a year-to-date decline of more than 30 percent for the currency, which was hit by the country’s 10-year civil war but only started to devalue in late 2019, as Lebanon’s economic crisis prevented Syria from gaining access to it. hard currency choked. .