Key Takeaways:
- The Central Bank established a new official USD exchange rate of LBP 15,000 and raised the Sayrafa rate to LBP 42,000 on February 1. The US dollar (USD)-Lebanese pound (LBP) parallel market exchange rate reached LBP 88,000 in late February before rebounding to LBP 80,000 after the Central Bank raised the Sayrafa rate to LBP 70,000 in early March. In addition to an increase in money supply (M0), commercial banks’ open-ended strike from February 7 through February 28 – which brought depositor-based Sayrafa transactions to an effective halt – drove parallel market depreciation.
- The Association of Lebanese Banks (ABL) declared their open-ended strike in the immediate aftermath of a February 2 ruling by the Lebanese Courts of Cassation, which effectively ordered commercial banks to grant depositors access to their USD-denominated accounts. ABL officially called for the strike in response to a lack of state support for banks and because the Capital Control law has yet to be passed. Throughout the strike, banking customer services were severely restricted, as no bank branches officially opened and despositers could only access their accounts – in a limited fashion – via ATMs.
- Fuel prices increased in line with LBP depreciation – despite stability in international Brent crude prices – and closed the month at LBP 1,638,000 for 98-octane, LBP 1,599,000 for 95-octane, LBP 1,521,000 for diesel, while cooking gas exceeded LBP 1,000,000 for the first time. This led to an increase in transportation, food, and energy costs.
- Supermarkets began pricing most goods in USD in line with a decision issued by the Ministry of Economy and Trade. The move follows dollarization of other sectors like tourism. The measure was slated to go into effect in early February but was delayed until later in the month due to objections raised by labor unions and consumer associations.
- Public school teachers resumed their strike in February despite the Ministry of Education announcing that it would supplant some of the lost purchasing power of teacher’s wages due to LBP depreciation. Some schools reopened at minimum capacity following a public announcement by the United Nations Children’s Fund, in which the organization warned about the dangers that school closures pose to Lebanese children and the future of the Lebanese economy.
By Crisis Analytics Team, Mercy Corps Lebanon
