Lebanon is floundering with its political, financial and economic crises, without any signs of a breakthrough in the near term that might alleviate the burden of the problems and concerns that burden the Lebanese citizen. The parallel market dollar continues to rise and has approached the threshold of 53,000, and on the first of next February, Lebanon will begin to adopt a new exchange rate for the first time in more than 25 years, as work officially ends at the exchange rate of 1,500 pounds, to be replaced by the 15,000 dollar, amid expectations also of a change. The Bank of Lebanon, the price of a banking platform, and the issuance of new circulars.
These issues coincide with the confusion caused by the investigations initiated by a European judicial delegation regarding corruption and money laundering cases that took place through Lebanese banks and cases of illegal enrichment. What awaits us on the financial and economic level in the coming days, and what is the impact of these investigations on the situation of banks and depositors’ money?
Increasing the exchange rate of dollars
Banking risk expert and researcher in economics, Dr. Muhammad Fahili considered in an interview with “Lebanon 24“Raising the exchange rate on a banking platform will become necessary next February if the dollar exchange rate continues to rise in the parallel market,” stressing that “there are measures that the Banque du Liban must take in the event that it continues to adopt a banking platform for trading, as it will force it, either to reduce From the ceilings for individuals benefiting from dollars on an exchange platform, or to raise the exchange rate of the platform, which may reach 42 thousand or more“.
And he said: “The Banque du Liban cannot stop the payment of salaries and wages to public sector employees on a banking platform because this matter has become necessary, just as paying salaries in Lebanese pounds will lead to great pressure on the market in terms of a sharp rise in the monetary mass in pounds when paying salaries, so it is better for it to pay it.” In dollars and to withdraw these dollars from the parallel market at a high price and bear the loss “.
Fahili pointed out that “the traditional tools that are available to central banks, such as interest, issuance of certificates of deposit, and enticing banks to employ surplus liquidity at the Banque du Liban, are no longer available at the Central Bank.” Also, the political authority is no longer able to issue debt securities such as treasury bonds or “Eurobonds” after defaulting. In payment, today it has become a banking platform, the only tool in the hands of the Banque du Liban in order to intervene in the market in terms of draining liquidity or pumping it.“.
He pointed out that “the Banque du Liban established a banking platform as a tool at its disposal to intervene in the exchange market and at the same time be able to finance the operating expenses of the Lebanese state.”“.
Has the Lebanese market turned into a comprehensive monetary dollarization? Fahili answers, “The main problem that the Lebanese economy is currently suffering from is the excessive reliance on cash, which is caused by the citizen’s lack of confidence in financial institutions.” And he stressed the existence of alternative methods that the Banque du Liban can resort to and are available, including, for example, returning to the payment methods available through the banking sector, i.e. approving checks, payment cards, credit cards, and transfers within the country, that is, adopting a minimum or obliging banks and institutions to adopt these means to finance Operating expenses for institutions and for financing the consumption bill for individuals and families“.--
He added: “Today, the Lebanese economy depends by more than 60% on the cash economy in Lebanese pounds and dollars, and we are going towards full dependence on the monetary economy, and one of the disadvantages of this matter is the danger of moving around with a large amount of banknotes, just as the availability of banknotes in people’s hands enhances speculation and the most important thing The results of speculation are an increase in the exchange rate of the dollar in the parallel market,” stressing that “the obligatory passage for solutions in the financial and monetary sector is to return to the means of payment available through the banking sector.”.”
Fahili considered that “focusing attention today on the Central Bank’s performance is unfair to him, as he took all the measures he could take to secure the depositor’s access to his bank account balances at a minimum, and he was able to secure him 400 fresh dollars for those who benefit from Circular No. 158 and secure public sector salaries and wages.” It allowed people with limited incomes in the public sector to benefit from a subsidized dollar on a banking platform, but these matters are not solutions, but rather exceptional measures, and in every circular issued by the Banque du Liban, it indicates that they are exceptional measures. “.
He pointed out that “these measures by the Banque du Liban and the absence of reforms lead to the erosion of the purchasing power of the Lebanese’s money and the erosion of the economic value of their property, and therefore the depositor and the citizen are the ones who pay the price.”“.
What about European judicial investigations?
Fahili says: “The European judicial delegation is searching for information to form a case because there is no issue today and no accusation of the judiciary, but rather of politics, and eyes are directed towards the Banque du Liban and its ruler, who is still dealing until now with the World Bank and the International Monetary Fund.”“.
He added, “Any initiative that goes towards exposing the corrupt who stole the money of the Lebanese and killed the Lebanese economy is welcome, but logically, can Riad Salameh and his brother only be held responsible for the financial collapse in Lebanon? It must also be noted that the Lebanese people are the ones who re-elected 90% of the population.” Those whom he accused of corruption and sent them back to Parliament to form committees and take decisions that are supposed to save us.“.
Fahili concluded by saying: “The judicial investigations are exaggerated and may be invested in another way. In the event that no serious accusation is brought against Riad Salameh within months, he will be considered innocent of all accusations, and he will be renewed in the governance of the Banque du Liban, and this is the most likely scenario.”“.