The lira is a victim of Lebanon’s politicians… a bottomless collapse

The lira is a victim of Lebanon’s politicians… a bottomless collapse
The lira is a victim of Lebanon’s politicians… a bottomless collapse
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A previous protest against the deterioration of the economy and the collapse of the lira (Anwar Amr/AFP)

The Lebanese currency continues the path of accelerating collapse against the US dollar, recording unprecedented numbers in the country’s history, crossing the threshold of 56 thousand pounds, yesterday, Wednesday, which primarily affects the prices of basic commodities, led by fuel, and foodstuffs that are not controlled and priced.

Likewise, the monetary collapse is reflected in a comprehensive high cost affecting various services, the most dangerous of which are health and hospital services, whose exorbitant bills have led to a decline in hospital occupancy by more than 50 percent, and a decrease in patients’ demand for medicines that, even if they are found in pharmacies, the citizen is unable to purchase them, knowing that the majority of Hospitals are also asking the patient to buy his medicine at his own expense.

In light of the constant pressure from the owners of gas stations and the Syndicate of wholesale and retail distributors of gas bottles and their accessories in Lebanon, and the resort to closure every time the Lebanese Ministry of Energy and Water issues a price that is not in line with the high exchange rate of the dollar on the black market.
Yesterday, fuel prices recorded a significant increase, in which the price of gasoline and diesel fuel crossed the threshold of one million pounds, while the price of a bottle of gas touched 700,000 pounds, in light of those concerned indicating that there is no ceiling for the rise in light of the flight of the dollar exchange rate.

In the context, the head of the Food Importers Syndicate, Hani Bohsali, warned in a statement that the food security of the Lebanese is about to be shaken, as a large segment of them is unable to obtain all their needs of commodities and food products due to the high prices due to the high price of the dollar.
Bohsali indicated that the repercussions of the rise in the exchange rate are negative on the livelihood of citizens in the first place and on institutions and markets, pointing out that if the recent study prepared by the United Nations indicated that there are 1.5 million Lebanese who face the risk of losing food, this number is likely to increase steadily. With what we see of the rapid collapse of the national currency.

The lira is a victim of political conflict
The scene of the rise in the exchange rate of the dollar on the black market does not constitute a “precedent” in Lebanon in light of the continuous recording of records. However, the rapid upward trajectory of the dollar in the past few days has begun to create great confusion in the markets, and moves, albeit shyly, the Lebanese street, with sporadic movements. At a time, experts in economics and finance link the scenario to the political conflict in the country, and the sit-in of some parliamentarians to push for parliament to hold successive sessions to elect a new president for the country in light of the vacancy in the first presidency since last October 31.

Likewise, experts expect that the collapse of the lira will continue on the impact of the most prominent event, which raged in the local arena, last Monday, and lies in the return of the judicial investigator of the Beirut port explosion, Judge Tariq Al-Bitar, to the investigation on his own based on a legal study he relied on, and his claim against 8 of the most prominent political figures. Security, military and judicial authorities in the country, and set sessions for their interrogation, while he also decided to approve requests for the release of 5 detainees in the case, in a development awaiting his political reactions and economic repercussions.

Adeeb Nehme, a consultant in development and poverty alleviation, told Al-Araby Al-Jadeed that “the daily fluctuations in the exchange rate of the dollar, and its high rise, are linked first to speculation in the currency, and the existing political conflict in addition to the current tension after Judge Al-Bitar’s step, and before that the sit-in of some representatives (from the forces of Change), in Parliament, and not to talk seriously about electing a president, in light of the suspension of parliamentary sessions. And he points out that “the power, no matter how limited, does not make any effort to try to get out of the crisis, which makes the path of collapse continuous and natural and deeper, which means an additional deterioration of the national currency that will lose more than 96% of its value, price inflation, and high prices.” livelihood, and the dissolution of state institutions, while people’s condition is getting more difficult, with flaming prices, and in light of the almost non-existent services, such as electricity, water, public transportation, health and medicine.

Nehme points out that “what prevents the total collapse of people’s standard of living is the remittances of expatriates in US dollars, and some aid of a humanitarian and relief nature, which is available through associations, in addition to limited savings, knowing that they are now suffering from attrition, but at the pace that We are on it, these factors will not have any result, because the social explosion is near, and it will affect the officials in power, who are like a gang outside the law, from here the explosion is inevitably coming, and people began to feel that in the past days because the economic crisis is taking place Its installation is currently with a political crisis.”

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Accordingly, Nehme points out that “the confrontation today must be popular political before the judicial one to penetrate the file of the Beirut port explosion as an entry point to resolving the financial and economic crisis,” noting that “the return of investigations into the port explosion and the political reaction may have a more decisive role in the possibility of an explosion.” An angry social politician by the Lebanese people against the authority, which the latter could use to create mobile tensions, and this will inevitably affect the course of the dollar exchange rate, an increase.

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Unmanned aircraft
For his part, the director of the Levant Center for Strategic Affairs, Sami Nader, told Al-Araby Al-Jadeed that there are two main elements in the collapse of the value of the Lebanese pound. to retreat.

Nader likens the current situation to a drone that is on the verge of falling, and no one is willing to pilot it or carry out any reform in it, pointing out that “all economic indicators today are in red, in light of the contraction in growth and the decline in GDP from approximately $54 million to 20 billion dollars, and the unemployment rate rising three times, in addition to the deficit in the balance of payments, the melting of the reserves of the Central Bank of Lebanon, and other criteria that put the Lebanese economy in danger, in addition to the failure to take any reform measures for the banking sector, and the depositors’ money is still stuck in banks”.

Nader points out that what makes matters worse, especially in the recent period, is the issuance of a series of decisions and circulars that encourage speculation, and introduce a new abolition to the rentier economy, through the portal of the Banque du Liban platform, “money exchange”, through buying and selling operations. Nader indicates that the continuation of the collapse is expected, and there is no ceiling for the rise in the exchange rate of the dollar, and we are also on the verge of entering the new exchange rate, i.e. 15 thousand pounds instead of 1507 pounds, into effect in early February, so that the Banque du Liban will secure the funds by printing the currency. , which will increase the collapse, given that the value of the lira is linked to the value of the domestic product and the economy’s ability to export.
And he continues: As long as the domestic product is declining, and our ability to export and replace imports is small, the lira will lead to more suffering, especially since the authority does not exist, and is unable to set an economic vision and implement it in the foreseeable future, which it did not do in the first place for a long time.

Intersectional reasons for the jumps of the dollar
“There are several intersecting reasons for the collapse of the lira against the dollar. The first is that the continuation of the crisis means a continued lack of confidence in the Lebanese currency, and therefore anyone who has the lira will use it directly for consumption or ask for dollars for savings, and this is what governs all supply and demand factors since 2019 until today, according to the economist. Lebanese Ali Noureddine for “The New Arab”.
On the other hand, Noureddine adds, “There is a mass of losses in the financial system, in addition to the state’s default and failure to pay its debts, and the two problems are relied on monetary policy to buy time in them, meaning that deposits in US dollars are paid in pounds, and here lies the monetary policy by creating the local currency.” To pay, while the state pays its bonds in pounds through the Banque du Liban, which lends it by printing currency, and thus its financing comes through cash creation.

Noureddine indicates that we are living in a vortex of multiple exchange rates, in the absence of any clear policy to float and unify the exchange rate, while there are big question marks about the procedures of the Banque du Liban, especially those related to an exchange platform, especially in terms of the mechanisms that govern its work, apart from the questions that are raised. The interventions of the Governor of the Central Bank, Riad Salameh, and those in their interest. And he continues: We recently saw the US sanctions against the financial expert Hassan Maklad, his two sons, and his exchange company, “Citex” (accused of financing Hezbollah’s financial activity), and he obtained a license from the Banque du Liban to transfer funds inside and outside Lebanon.

Accordingly, Noureddine says that the Central Bank’s measures to deal with the monetary crisis do not inspire reassurance, nor do they inspire confidence in the market, except that it is not certain that they address the root of the problem. On the other hand, he believes that the solution to the banking sector crisis is not only linked to the Banque du Liban, as there are legislations related to the financial sector that are supposed to be approved in Parliament and implemented by the Central Bank, just as the Governor of the Banque du Liban must adopt a reliable path to unify and float the exchange rate in a deliberate and controlled manner. , Provided that it intervenes in the market through a transparent mechanism under its control, which affects the exchange rate in a clear way, and this is far away so far.

According to all that he mentioned, Noureddine considers that there is no indication of an exit from the whirlpool, and the path of collapse continues, and there is no ceiling for the rise in the exchange rate of the dollar, which, as it reached 56 and 57 thousand pounds, could exceed one hundred and two hundred thousand pounds.

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