The dollar will continue to rise … these are the reasons

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The US dollar continues to rise against the Lebanese pound amid a financial and economic crisis that Lebanon has been experiencing for months, to which was added the spread of the Corona pandemic. Although the health measures taken are good and perhaps more for a country that is mostly “bankrupt” economically and politically, citizens suffer from a major crisis, accompanied by a massive fear of hunger after the end of the emerging virus crisis.

Perhaps the prices of food and consumer products, which have risen about 30 percent and more, are the greatest evidence for the citizen that the dollar continues to rise as well, given that most of the products, raw materials and goods are imported. And touches the US dollar about 2900 LL, amid expectations that it will reach 3000 LL soon. While the Bank of Lebanon continues to confirm that the official exchange rate is between 1515 LL and 1530 LL.

As for money changers, it is another story. There are legitimate money changers and illegal money changers. Legitimate bankers are obliged to circulate the Banque du Liban to buy the dollar for 2000 LBP, while non-legal bankers depend on buying and selling the black money market, which is currently as follows:

Purchase: USD = 2850 LBP

Sale: the dollar = 2770 LBP

And in observing Al-Nahar a number of money changers, it was clear that some of them buy the dollar for 2000 LBP, and sell it to citizens at 2800-2850 LBP.

Reasons for the continuous rise of the dollar … and the position of banks
It has become clear that the dollar exchange rate is determined according to supply and demand. If the demand increases more than supply, the price rises to the point of equating supply and demand. Consequently, the main reason for the increase in the exchange rate of the dollar is the high demand for supply. As for the factors that affect supply and demand in Lebanon in particular, the economist Jassim Ajaga summarized it by 7, which are:

1- Loss of confidence in the economy and the banking sector, and this increases people’s fears and raises demand.
2- The financial situation of the Lebanese state, especially after the government announced its failure to pay its entitlements from the Eurobonds, and this stops the flow of the dollar to Lebanon, which reduces the offer, given that the dollars available in the Bank of Lebanon and the Lebanese banks are limited.
3- The black horizon of the Lebanese economy, which limits the export capacity, especially with the outbreak of the Corona virus. This reduces exports and thus reduces supply.
4- The absence of a rescue plan from the government, which leads to a judgment in the loss of investor confidence (lower supply) and citizens (higher demand).
5- The unauthorized exchange market volatility despite the start of the pursuit process by the security services, which increases citizens ’fears and raises the price of the dollar artificially (speculation).
6- The heavy storage carried out by citizens and companies in homes and companies, which reduced the value of the offer.
7- American sanctions that limited the flow of the US dollar to the Lebanese market.

On the other hand, the economic expert, Nassib Gabriel, considered that the private sector is of great importance in the local economy, and the absence of confidence in the private sector, which kept investors away. He also spoke to “Al-Nahar” about the great impact of the decision not to pay the “Eurobonds” bonds on the high dollar exchange rate, and on bank losses as well.

The dark future

Economy Minister Raoul Naama explained in an interview with “An-Nahar” that “the prices of products will continue to rise with the rise of the dollar … The cost of manufacturing has increased on the Lebanese people, and the cost of importing raw materials.” He also considered that “future expectations are black towards the reality of the dollar’s unofficial exchange rate, especially as the next stage is a period that will be chaotic as a result of the intersection of several factors, including the Corona virus, the state’s failure to pay, the high rate of American pressures, the proposed projects for the capital control … and also The uncertainty left by the absence of a rescue plan for the government. “

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