Lebanese Ministry of Finance Decides to Impose Tax on Sayrafa Profits

Lebanese Forex Market

Lebanese monetary authorities announced the decision of unifying the LBP exchange rate against USD at 89,500 starting Feb 16^th, 2024. This rate represents the BDL’s electronic platform rate used for calculating commercial banks’ and BDL’s balance sheets, though no decision have been reached on the “banking exchange rate” yet.

The Lebanese exchange rate has maintained a relatively stable exchange rate of approximately 89,700 USD/LBP in the parallel market by June 14^th, 2024. It is crucial to recognize that this stability is not backed by robust fundamentals, but by the cautious and tight monetary policies by BDL, and as BDL deactivated circular 161 related to Sayrafa since August 2023 when the acting governor Mr. Wassim Mansouri took the reign of BDL. When talking about BDL circular 161, lately, the Ministry of Finance issued a decision to apply a 17% tax on the profits from Sayrafa operations on people and companies performed operations that exceeded $15k in 2022 and 2023 as article 93 of the 2024 budget introduced this tax. It is interesting to note that MoF decision stated that commercial banks and exchange companies have to provide tax administration, electronically, information on the clients benefited from Sayrafa, which violates banks’ secrecy law. However, given the ongoing financial crisis and the absence of a recovery plan, Lebanon’s future recovery remains uncertain and unstable.

As for the Euro/LBP currency pair, the Euro depreciated against the LBP with the currency pair going from last week €/LBP 96,660 to €/LBP 95,675.5 by June 14^th, 2024. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound slightly increased by 0.18% standing at 227.67 points on June 14^th, 2024.

International Forex Market

The USD Index (DXY) slightly rose by 0.58% to stand at 105.49 on June 14^th, 2024. The US Dollar witnessed improvement for the second consecutive week, reinforced by fears that the Federal Reserve could maintain high interest rates for longer.

The Euro slightly depreciated against the dollar by 1.02% over the course of the week and reached EUR/USD 1.069 by June 14^th, 2024, pressured by the political uncertainty in France. The French President Macron called for a legislative election after the far-right’s win in the European Parliament elections last Sunday. This decision raised concerns regarding fiscal stability given that Le Pen’s National Rally previously promoted policies such as lowering retirement age and cutting sales taxes.

In contrast, the British Pound slightly appreciated against the dollar by 0.21% over the course of the week and reached GBP/USD 1.2748 by June 14^th, 2024.

For other currencies in Europe, the Swiss Franc appreciated by 0.5% by the end of this week to stand at USD/CHF 0.8914 on Friday June 14^th, 2024.

Elsewhere, the Japanese Yen slightly depreciated by 0.56% to reach USD/JPY 157.58 as the Bank of Japan decided to maintain interest rates unchanged as anticipated following its first rate hike in seven years at the March 2024 meeting. Also, BoJ stated that it will buy Japanese government bonds at the current pace until the next policy meeting in July.

Similarly, the Chinese Yuan slightly depreciated by 0.11% to record USD/CNY 7.2556 by June 14^th, 2024 as signs of economic weakness and lack of fresh stimulus measures in China diminished market sentiment.

Furthermore, the Australian and Canadian dollar appreciated over the course of the week by 0.44% and 0.05% respectively to stand at AUD/USD 0.6611 and USD/CAD 1.3757 on Friday June 14^th, 2024.

Commodities

Gold prices rose by 1.05% over the course of the week to reach $2,316.84 / ounce on Friday June 14^th, 2024, on track for its first weekly gain in four weeks. Investors evaluated less than anticipated US inflation figures that supported an only one 25 bps interest cut in 2024, with four Federal Open Market Committee (FOMC) members expecting no cuts at all in 2024.

Crude oil prices increased over the course of the week by 3.4% and reached $78.1/ barrel due to a strong global demand outlook that offset market uncertainties on the timing of US interest rate cuts. This week, US Energy Information Administration (EIA) raised its global oil demand growth forecast from 900,000 bpd to 1.1 million bpd in 2024. In addition, OPEC kept its forecasts for a robust growth in oil demand supported by the anticipation of increased travel and tourism in the second half of 2024. On the supply side, Russia promised to comply with its output obligations as per OPEC+ agreement after exceeding its quota in May due to technical reasons.

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