A Severe Economic Crisis in Lebanon: The Lebanese Pound Has Collapsed
ECONOMY a Severe Economic Crisis in Lebanon: The Lebanese Pound Has Collapsed
July 18, 2022 By Mohamad Zreik for Modern Diplomacy
In his last television interview, the Governor of the Banque du Liban, Riad Salameh, he briefly mentioned the possibility of eliminating the zeros from the currency (Lebanese Lira). A key instrument in this operation is raising the interest rate on the country’s currency to an all-time high, in an effort to encourage residents and businesses to hold and use the local currency and prevent dollarization.
To restore confidence in their currency, encourage and attract investors through bank deposits, or buy debt instruments like bonds and treasury bills, the deletion process may be a prelude to the going of a troubled and financially bankrupt state (such as Lebanon, which stumbled financially in March 2020) to the International Monetary Fund, international financial institutions, and others.
… Hyperinflationary countries have an uphill battle to regain the trust of both domestic and foreign markets. Most directly, this can be achieved by a stabilization program that uses exchange rate-based monetary targeting, by improving operational independence of the central bank, and by repealing policies that skewed economics. In other words, if governments merely remove zeros from the national currency and don’t pursue complete economic changes, they won’t have any impact
https://moderndiplomacy.eu/2022/07/18/a-severe-economic-crisis-in-lebanon-the-lebanese-pound-has-collapsed/
Also
War in Ukraine leaves Lebanon hungry
As wheat imports from Ukraine and Russia dwindle, Lebanese people are in danger of going hungry.
July 17, 2022
… With its currency in freefall, its economy shattered and its flatlining legislature incapable of offering reprieve, Lebanon was one of the most vulnerable countries in the world to a supply shock. And then came Ukraine.
Vladimir Putin’s invasion not only brought its neighbor to its knees, but it also decapitated Ukraine’s wheat export industry and, in doing so, sparked unprecedented prince hikes and scarcity of grain across its main export markets in the Middle East.
As of early February, just before the Russian invasion, more than 95% of Ukraine’s grain exports — wheat and maize — were shipped via the Black Sea, and half were sent to the Middle East and North Africa. But after Ukraine’s southern ports Odessa, Kherson and Mykolaiv became battlegrounds, the key corridor was closed, suffocating the maritime trade that Lebanon relied upon.
… The food security crisis has only added to the woes in Lebanon, which has been hit by one of the three toughest economic crises the world has witnessed since the 1950s — the costs of which have largely been borne by ordinary people. The country, once known as the Switzerland of the Middle East, had declared bankruptcy in March 2020. Public debt has reached over $90 billion, equivalent to around 170% of its gross domestic product (GDP); the Lebanese pound, officially pegged at 1,507 to the dollar since 1997, has lost around 90% of its value; inflation has reached 201%; the government’s foreign currency reserves are depleted; and nearly three-quarters of the population are estimated to live below the poverty line. For the first time in 27 years, Lebanon has been ranked as a "Lower Middle Income Country" by the World Bank.
Read more: https://www.al-monitor.com/originals/2022/07/war-ukraine-leaves-lebanon-hungry#ixzz7ZPasxk2t
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