We recently experienced a significant drop in the dollar exchange rate against the Lebanese pound, which approached the limits of 20,000 Lebanese pounds after exceeding the 33,000 pounds in prior times.
As trade volume on the “Sayrafa” platform surged and this week surpassed $50 million per day, the question is whether this drop will continue and what will be necessary to sustain it.
Nassib Ghebril, chief economist at Byblos Bank, said in an interview with Sawt Beirut International that the reason for the existence of the parallel market is the crisis of trust that began in late 2017. This crisis slowed the flow of capital to Lebanon, specifically the flow of deposits, and then the crisis of trust grew as there was a sharp decline in the flow of capital by September 2019, resulting in the emergence of a parallel market for the dollar exchange rate for the first time in 27 years due to a lack of liquidity in foreign currencies.
Ghebril regretted that no action had been taken since the outbreak of the crisis, similar to the rest of the countries that take immediate measures to maintain financial and monetary stability and initiate the reform process in such crises.
He believed that the failure to implement reform measures, in addition to the political vacuum and institutional paralysis (as we remained without a government for 13 months), led to a vacuum that allowed speculators, beneficiaries and illegal money changers to control the exchange rate of the dollar in the parallel market, which is an illegal and black market that is not subject to any supervision or other legal procedures.
Given that this speculation in the parallel market to reap quick profits led to the exchange rate reaching record levels, such as those seen since early December 2020, and in order to halt this rise, the Banque du Liban intervened in mid-December last year by issuing circular No. 161, which allowed depositors to withdraw in dollars rather than Lebanese pounds within the monthly withdrawal limits.