After it reached 60,000 dollars.. What are the repercussions of the historical collapse of the Lebanese pound?

Beirut

Lebanese are tired of circulating phrases such as the "historic and unprecedented collapse of the lira against the dollar" after their diaries have become more like a forced exercise to adapt to the repercussions of the free fall of their national currency.

Citizens say, "Did we believe only a few months ago that the exchange rate of the dollar was 50,000 pounds?"

And here it is, within days, breaking the threshold of 60,000 dollars, in a runaway that economists are unable to predict its future outcomes in light of the continuation of the same monetary policies, and the application of the horizon of political, judicial and external solutions as a way to curb this collapse.

Also in a daily scene, a large segment of the Lebanese enters the shops with a large bundle of lira notes in their pockets to buy a few of their food needs, which are witnessing massive inflation in prices, and after a 100,000-lira note, for example, was worth about 66 dollars before the crisis, according to the official exchange rate of 1,500 liras. Today it is worth less than two dollars.

This bitter reality constitutes - according to experts - a serious threat to food and social security, as a result of the widespread wave of dollarization of the prices of goods and services in exchange for the continuous erosion of the value of household incomes and the widening unemployment and multidimensional poverty that affects about 85% of the Lebanese people.

The reasons for the continuous collapse

The Lebanese wake up every day to fluctuations in the exchange rate of the dollar, which is transmitted to them by illegal electronic applications that manage the rudder of the black market for their currency, and voices rise from the repercussions of this, and it automatically affects the price of dollarized fuel, as the price of a can of gasoline (20 liters) exceeded one million pounds (about 19 dollars). ) and pushes merchants to double their prices randomly as a result of the absence of effective oversight by state institutions.

This turbulent rise in the exchange rate of the dollar comes weeks after the Central Bank suspended its circular, which stipulated the sale of dollars without a ceiling to institutions and individuals, after raising the exchange rate of the dollar on an exchange platform to 38 thousand pounds.

Azza Hajj Hassan, a journalist specializing in economic affairs, states that this new deterioration, in the value of the lira, once again confirms the ineffectiveness and sustainability of the Central Bank's procedures, which constitute a kind of speculation and play with the psychological factor of the market and people facing the worst case of inflation.

And she tells Al-Jazeera Net that the financial and economic data do not herald a real decline in the exchange rate of the dollar, but rather indicate its continuous rise without a ceiling.

And it states that the Central Bank’s previous interventions in the black market were slowing the pace of the lira’s deterioration by pumping dollars into the market, albeit in modest amounts.

As for what Lebanon is witnessing today of the rapid deterioration of the exchange rate of the dollar, it is, according to the expert, the result of a combination of financial, economic, political, judicial and external factors.

The journalist believes that one of the most prominent of these factors is the unannounced failure of the course of Lebanon's agreement with the International Monetary Fund, or at least the closing of its page now, in parallel with the opening of the file of financial corruption in the country.

About two weeks ago, a European judicial delegation from Germany, France and Luxembourg left Lebanon after it conducted investigations, managed and supervised by the Lebanese judiciary, in financial and banking issues and interrogated former and current bankers and financial officials, and is supposed to return again in mid-February to complete its investigation files.

The journalist considers that this causes great concern to the financial and monetary authority, and reflects negatively on the reality of the market and the lira.

And she says, "In addition to that, an American movement on the line of imposing sanctions carried a message to the political, monetary and financial authority in Lebanon, stating: A warning against the continuation of the relationship between the monetary authority and Hezbollah, because the company that was sanctioned is the direct link between two parties: the Bank of Lebanon and Hezbollah."

On Tuesday, the US Treasury imposed new sanctions on individuals and entities, on the grounds that they were accused of having financial links between them and Hezbollah. The sanctions affected Hassan Makled, his two sons, Rayan and Rani, and the exchange company he owned because of their financial relations with Hezbollah.

The journalist finds that these sanctions contributed to an additional shock to the money market, which is suffering under the weight of the psychological and political factors of the market, in addition to the rapid judicial developments in the file of the Beirut port explosion.

Therefore, you find that the withdrawal of large amounts of dollars from the market is deliberate by speculators, traders and importers in anticipation of further deterioration and crisis in the country that complains of a presidential vacancy and paralysis in the performance of the caretaker government.

Central is powerless

Faced with this reality, the Central Bank is powerless to control the market, because it moves alone without being accompanied by the political authority with financial, economic and reform measures, according to it.

For his part, the former head of the Banking Supervision Committee, Samir Hammoud, expects the lira to continue its collapse into a bottomless abyss, but he considers that the problem is no longer at the level that the dollar price will record in the future, but rather with the repercussions of the political situation and the dissolution of the state, in exchange for relying on the funds of depositors in the “Central”. Which is controlled by a basket of circulars and decisions that determine the mechanism of its use.

He tells Al-Jazeera Net that the Central Bank's interventions in the money market have incurred a lot of losses with depositors.

However, he finds that the governor of the bank, Riad Salameh, will continue his interventions in the market until the end of his term next May, and expresses his concern about what he calls European and American pressures that negatively affect the money market in the country and accelerate the collapse of the lira, which will increase - in his opinion - the living crises. .

In light of the continued collapse of the lira, many are asking about the fate of the value of bank deposits that have been illegally held since the outbreak of the crisis in the fall of 2019.

Hammoud agrees with Hajj Hassan in terms of considering that the deposits face a state of significant erosion in their value, and the journalist says: The higher the real dollar exchange rate on the black market, the more the deposits erode, because today they are spent according to the price of 8 thousand pounds to the dollar, while starting from the beginning of February they will be spent on 15,000 pounds for the value of the bank dollar, and yet “the bank cut rate from deposits will remain at least 75% because the real dollar price in the market is rising.”

The consumer pays the price

Various sectors and services are affected by the high exchange rate of the dollar, especially since Lebanon is based on importing more than 90% of its consumer, industrial, food and health needs.

The head of the Consumer Protection Association, Zuhair Berro, considers that the final consumer, that is, the citizen, is the one who pays the price from his pocket for all this collapse, indicating that the volume of price inflation for various commodities has accumulated more than 3000% since the start of the crisis, and he describes this as a dangerous indicator, in light of the disruption various constitutional state institutions.

He tells Al-Jazeera Net that the deterioration of the lira reflects a state of comprehensive collapse, and he expects chaos scenarios to escalate in Lebanon, due to the absence of productive economic policies and the continuation of the same policies that depend on import and consumption.

Berro confirms that by tracking the associations, merchants and importers are taking advantage of the chaos to absorb the pockets of people by raising prices in order to multiply their profits and build their wealth, benefiting from the absence of a system of control and punishment, and the political, monetary and judicial authorities bear all the serious repercussions that threaten the livelihood of the Lebanese and destabilize their social security.