The Central Bank of Lebanon announced entering the process of unifying the multiple exchange rates in Lebanon.
After more than two decades of pegging the Lebanese exchange rate to 1,507 for the dollars, BDL declared changing banks’ withdrawal rates by adopting 15,000 LBP/USD as an exchange rate starting February 2023. This announcement will be applied by modifying rates related to bank circulars that would be brought up from 8,000 to 15,000 LBP/USD. In turn, by embracing the new exchange rate, the Central bank would then have just two rates: 15,000 and the Sayrafa rate which currently sits at around 30,000 LBP/USD. Noting that all circulars would be canceled once the Capital Control Law is approved and put in place.
Meanwhile on the parallel market, the Lebanese national currency has been following a sharp fall for the past month despite the announcement of the Central Bank regarding stopping its purchase of dollars from the parallel market. Hence, the Lebanese exchange rate has been wavering around 39,400 for the past month with a minimum of LBP/USD 36,800 and a maximum of LBP/USD 41,300, the lowest rate since the start of the crisis.
On a different note, currency in circulation outside of BDL recorded a huge increase since year start of 58.08% and 66.25% annually to reach $47.98B by the end of November 2022. The increase of currency in circulation has been aligned with the implementation of exchange rate of 8,000 as well as the fact of printing money to cover public wages increase and most importantly absorbing dollars from the parallel market. However, Central Bank Governor has stated that using the rate of 15,000 instead of 8,000 and 12,000 won’t be leading to higher currency in circulation since depositors would be withdrawing their money in dollars banknotes at rate of Sayrafa platform. Interesting to add that, whereas clarity is obtained now concerning deposit withdrawal rates, no such clarity exists as of yet regarding the paying back of USD loans.
Overall, depositors have been paying the biggest price during the crisis and have been mostly unable to access dollar savings or obliged to make withdrawals in Lebanese currency at unfavorable rates compared to the parallel market. Nevertheless, the process for IMF agreement has been slow, but the announcement would be a step closer to the pre-requisites needed for IMF finalizing deal.
Currency in Circulation outside BDL, Parallel market Exchange rate and Sayrafa Exchange rate(Dec 2021 – Nov 2022):
Source: BDL, Lira rate, BLOMINVEST