Key Takeaways:
- The Central Bank adjusted the Sayrafa exchange rate twice in March, both times in response to rapid Lebanese pound (LBP) depreciation. On March 1, the Central Bank “increased” the Sayrafa exchange rate from LBP 45,400 to LBP 70,000. The Central Bank also allowed non-government employees and businesses to access the exchange platform, with eligible individuals able to convert up to LBP 1 billion per commercial bank account and LBP 10 billion per business account. The pound depreciated again later in the month, with the US dollar (USD)-LBP parallel market rate reaching LBP 143,000 on March 21. This prompted the Central Bank to adjust the Sayrafa rate again, this time to LBP 90,000. These measures resulted in LBP appreciation and a period of relative stabilization, with the parallel market exchange rate reaching LBP 107,500 by the end of March.
- Fuel distributors convened on March 23 to discuss and propose measures which account for LBP volatility, including developing an online platform to monitor fuel prices indexed to rapid increases in the USD-LBP parallel market exchange rate. Fuel prices first increased in March in line with LBP depreciation and later rebounded after the pound gained on the dollar. Fuel prices closed the month at LBP 2,000,000 for 98-octane, LBP 1,954,000 for 95-octane, LBP 1,748,000 for diesel, and LBP 1,247,000 for cooking gas.
- The Association of Lebanese Banks (ABL) resumed their strike on March 14, resulting in the closure of commercial banks through March 22, when ABL ended the strike under Central Bank pressure. ABL previously criticized the Central Bank’s lack of strategic planning, which they claim led to reduced liquidity in commercial banks. The ABL strike appeared to contribute to LBP depreciation and highlighted the role of commercial banks in currency fluctuations.
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Employees at state-owned internet provider Ogero went on strike on March 23 to protest a lack of financial support as their salaries have significantly reduced in purchasing power amid LBP depreciation. Since technical support was almost completely unavailable during the strike, internet service disruptions were reported across Lebanon. Ogero stated that it is unable to increase employee salaries due to budget cuts. On April 1, the executive board of the Ogero employees’ union suspended the strike until the next cabinet meeting is held.
- In a March 23 report, the International Monetary Fund (IMF) emphasized the urgent need for financial system restructuring, exchange rate unification, and increasing fiscal revenues. The report asserted that the Central Bank’s approach to currency depreciation and monetary policy has resulted in USD 26 billion in losses since Oct 2019. While the IMF cited deleveraging in the corporate sector, tourism spending, and remittance inflows as stabilizing forces in the Lebanese economy, it also noted that tax indexation and government decrees have failed to narrow the gap between multiple exchange rates for taxes and customs, resulting in shortfalls in fiscal revenue.
By Crisis Analytics Team, Mercy Corps Lebanon
