![]() ![]() How Birches Group can guide your organization In March 2023, Lebanese prosecutors charged Salameh, his brother, and an associate with forgery, illicit enrichment, and tax law violations. Salameh is suspected of financial misconduct, including money laundering and embezzlement. European investigators are currently probing the alleged state fraud and actions of Banque Du Liban governor Riad Salameh, who has held the post for three decades. Unifying exchange rates, including the parallel market rate used for most goods and services, is a precondition the IMF has set to secure a US$3-billion aid package.Ĭentral bank governor under investigation. The ISG has urged leaders to immediately harmonize exchange and adopt the laws needed to restore investor confidence. With only a caretaker government and limited authority, an economic plan with reforms required by the International Monetary Fund (IMF) has yet to be devised. This deadlock is unsustainable and paralyzes the government at all levels, says the International Support Group for Lebanon (ISG). ![]() Its deeply divided Parliament has yet to elect a new head of state. Since the end of October 2022, the country has been without a president. Political paralysis has made matters worse for Lebanon. According to parallel market rates on, the LBP trades at 79,000 to 1 USD as of 6 March 2023.ĮCA International foresees more devaluations of the official rate in months to come. But the official exchange rate is well below the rate on the street, says Al-Monitor. ![]() Officials say the measure is a step towards stabilizing the LBP and eliminating the many exchange rates that have emerged in recent years. In February 2022, Banque De Liban revalued the official exchange rate to 15,000 LBP to 1 USD-a 90% devaluation from the longtime peg. The rate remained unchanged for 25 years. Since 1997, Banque Du Liban (Lebanon’s central bank) has set the exchange rate at 1,507.50 LBP to 1 USD. Trust and confidence in the LBP have waned over the past three years due to many factors and recent events.Ĭurrency devaluation. Why are organizations in Lebanon dollarizing? Outside the public sector, employees are fully or partially paid in USD. Other businesses have started charging for their goods and services-including rent, household items, clothing, gas, health insurance, and medical care in USD. In March 2023, shops and supermarkets began to price their products in USD. The decline in the LBP’s value has led to businesses pricing their items in USD, where customers pay the local currency based on the daily parallel market rate. This occurs when a country’s currency loses its usefulness as a medium of exchange due to hyperinflation or instability. Dollarization explainedĭollarization is the process of replacing the domestic currency with a foreign one to serve the essential roles of money in the economy. Some observers and economists believe dollarization would be a solution to the crisis and a way to secure monetary stability. The LBP’s plunge has led to a de facto dollarization of the economy, says Arabian Gulf Business Insight. (It should be noted that the significant exchange rate movement we have been seeing in Lebanon is most likely caused by the UN switching its source of exchange rates to one that better reflects local conditions.) In mid-December, Lebanon’s level of volatility escalated to Level 5, indicating a wide prevailing practice to denominate salaries in United States Dollars (USD). A highly volatile and dollarized marketīirches Group first observed signs of volatility in Lebanon in November 2022, when the country was listed in the Market Monitor report at Level 4 (of six). According to the United Nations (UN), over 80% of the population lives in sudden, multidimensional poverty. Hyperinflation has reached triple digits, immensely reducing purchasing power. International Crisis Group reports that the plummeting LBP has caused havoc across the Lebanese economy. The country’s currency, the Lebanese Pound (LBP), has lost over 90% of its value since the crisis erupted in 2019. Birches Group reports on what is happening in labor markets that are making headlines around the world, bringing you up to date on the newsĮxperiencing a financial and economic collapse that the World Bank ranks among the world’s worst since the 1850s has led to dollarization in Lebanon. ![]()
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