Key Takeaways:
- The Lebanese pound’s (LBP) value against the US dollar (USD) declined in March, largely over concerns about how long Circular 161 will remain in force and multiple probes targeting the banking sector locally and internationally. Investigations into the Central Bank governor and his brother also impacted currency weakness.
- The Central Bank injected about double the amount of USD via the Sayrafa platform compared to February. However, USD cash injections under Circular 161 affected the value of the LBP to a lesser degree in March than in February. Any potential cessation of USD sales under the circular will result in a sharp decline in the value of the LBP.
- Bread prices are surging and further price increases are expected due to global inflationary pressure and the effect that the Ukraine conflict is having on commodity prices. Fear of shortages resulted in temporary queues at fuel stations similar to the fuel crisis in the summer of 2021. While fuel prices increased across the board in March, diesel surged by about 60%.
- A key indicator of the severe economic crisis that Lebanon faces is changes in night light reflectance at the cadaster level, which was heavily impacted by the surge in diesel prices in March. According to data on geographic distribution of electricity consumption, Lebanon’s electricity consumption previously declined by 53% from December 2019 to December 2021.
- An International Monetary Fund (IMF) delegation is in Lebanon for another round of talks. While a staff-level agreement was announced on April 7, economic reforms stipulated by the IMF must be implemented to unlock funds. The 2022 budget remains under review in the parliament. Separately, the capital control law was approved by the cabinet and sent back to the parliament for ratification.
- Candidates submitted their applications to run for Lebanon’s parliamentary elections, which are currently scheduled for May 15. While it appears likely that elections will go ahead, logistics and budgeting concerns leave open the possibility of last-minute delay.
By Crisis Analytics Team, Mercy Corps Lebanon
