(Photo Credit: Houssam Shbaro/Anadolu Agency)
The Lebanese currency sunk to a new historic low on 14 March, trading at 100,000 lira per US dollar on the parallel market. The dizzying plunge came on the same day commercial banks resumed an ‘indefinite’ strike to protest against unfavorable court rulings.
Before the manufactured crisis started, Lebanon’s largest banknote in circulation, the 100,000 LBP bill, was worth around $66.67. It is now worth just one US dollar.
Following Tuesday’s plunge, the Lebanese currency lost around 98.5 percent of its pre-crisis value in 2019.
The official exchange rate before the start of the crisis was 1,500 LBP per US dollar. This finally changed last month when the Central Bank devalued the exchange rate for the first time in 25 years, pegging the lira to 15,000 pounds per US dollar after months of delays.
Since 2019, Lebanon has been experiencing what the World Bank describes as the world’s worst economic crisis in 150 years, following decades of corruption and mismanagement by the financial elite. The collapse has left depositors without access to their life savings and has plunged over 80 percent of the population below the poverty line.
Lebanese banks unilaterally imposed draconian restrictions on withdrawals in US dollars and Lebanese liras that were never formalized by law. This situation, coupled with the banks’ role in creating the crisis due to their illicit dealings with the Central Bank and its chief, Riad Salameh, has led depositors to seek access to their funds through lawsuits and often by force.
Judges have also sought to seize the funds of bank directors and board members or to force lenders to pay out dollar deposits in lira at the old 1,500 exchange rate.
In response to this, commercial banks launched an “open-ended” strike last month to protest what the Association of Banks in Lebanon (ABL) described as “arbitrary” judicial measures against lenders.
The ABL temporarily lifted the strike this month after caretaker Prime Minister Najib Mikati ordered security forces to ignore judicial orders against Societe Generale du Banque du Liban (SGBL) and Bank Audi, two financial institutions charged with money laundering.
Last week, the ABL issued a statement claiming “no liquidity” to pay back depositors locked out of their savings.
Despite the urgency of the crisis, Lebanon’s political class has failed to take any action to help citizens. Since last October’s elections, the country has been under the control of a caretaker government with no president, as rival alliances in parliament refuse to compromise on a candidate.
Their inaction has also delayed the delivery of a three billion loan from the International Monetary Fund (IMF). The IMF said last year that progress in implementing required reforms remained “very slow.”
Last November, US Assistant Secretary of State for Near Eastern Affairs, Barbara Leaf, warned that the situation in Lebanon is open to all possible negative outcomes, including a “complete disintegration of the state and the collapse of its security forces.”
She said that the Lebanese will likely have to endure more pain before forming a new government, adding that collapse will enable Lebanon “somehow to be rebuilt from the ashes, freed from the curse of Hezbollah.”