In crisis, Lebanon ready to float its currency to obtain IMF assistance

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Lebanon will set up a floating exchange rate for its local currency, Lebanese Finance Minister Ghazi Wazni said on Friday May 15. This is one of the conditions laid down in the country by the International Monetary Fund to release financial aid.

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In recent months, in private exchange offices, the Lebanese pound has depreciated sharply. In April, the local currency crossed the threshold of 4,000 pounds for one dollar while the central bank has applied since 1997 a fixed rate, or 1 dollar for 1,507 pounds.

The two currencies are used daily in Lebanon, an over-indebted country and plagued by an economic crisis unprecedented since the end of the civil war (1975-1990).

After weeks of procrastination, the Lebanese government finally asked for help from the International Monetary Fund in early May. He began negotiations with the monetary institution this week for crucial aid as part of a rescue plan adopted in late April.

Nine billion aid targeted

At the request of the IMF, the Lebanese government therefore decided to set up a floating exchange rate, as part of a plan to rescue its economy , plunged into a deep crisis.

The executive has also committed to restructuring the banking sector. He wants to cut the number of commercial banks operating in the country by almost half.

Lebanese authorities have started talks with the IMF this week to seek financial assistance to save the country from economic collapse. They hope to get a loan of around $ 9 billion.

The bailout plan also provides for debt restructuring of 92 billion dollars (170% of GDP), after the announcement in March of the first default in the history of Lebanon.

Dramatic rise in prices against a background of containment

The economic sinking of the country was one of the triggers in October 2019 of an unprecedented uprising against the entire political class. Almost unchanged for decades, she is accused of corruption, incompetence and of having pushed the country to the brink.

The anger is amplified after draconian restrictions on bank withdrawals dollar and soaring prices. A situation exacerbated by containment due to the Covid-19 pandemic.

► Read also: Lebanon adopts a vast reform plan to get out of the crisis

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