by Dana Halawi
BEIRUT, – The price of the U.S. dollar in the Lebanese black market dropped by around 20 percent following the appointment of Prime Minister Saad Hariri, prompting local experts to attribute this drop to the positive political atmosphere.
“The appointment of Hariri for the formation of a cabinet reflects a commitment to the French initiative which pledged to help Lebanon in reforming its different sectors; this has encouraged people to sell their dollars at a high price before it drops to lower levels, hence higher demand on local currency,” Patrick Mardini, president of the Lebanese Institute for Market Studies, told Xinhua.
The price of the U.S. dollar in the black market reached an unprecedented level of 9,000 Lebanese pounds per dollar few months earlier due to the shortage of the foreign currency in the country. The dollar’s price was then between 7,800 and 8,000 pounds before dropping to 6,400-6,500 in the past couple of days.
Meanwhile, the official rate of U.S. dollar to the Lebanese pound at banks remains at 1,515, while people withdraw their U.S. dollar deposits from banks in Lebanese pounds at the price of 3,900.
Rock-Antoine Mehanna, economist and former advisor to the World Bank, told Xinhua that the appointment of Hariri created a positive atmosphere due to factors such as his international ties.
However, he believes that the price should have dropped to below 5,000 Lebanese pounds per dollar, given the fact that some political parties were not in favor of Hariri coming back to office.
“Some people are currently adopting a wait-and-see approach,” Mehanna said.
Lebanon has been going through its worst economic and financial crisis with public debt standing at around 94.3 billion dollars in the absence of sufficient revenues for the government to cover its expenses, prompting the Central Bank of Lebanon to increase its printing of Lebanese pound to finance the government which caused further weakening to the local currency.
“If we want the U.S. dollar to drop further, we should first stop printing Lebanese pound,” Mardini explained. “It is true that people are now demanding more but supply of the Lebanese pound has not stopped … we did not start with reforms that would generate revenues neither did we restructure the banking sector.”
For his part, Mehanna said if a government is formed soon and a conference for donors countries, aimed at helping Lebanon, is held as promised by French President Emmanuel Macron, the price may decrease to below 5,000 Lebanese pounds per dollar.
The dollar crisis in Lebanon started in September 2019 when wealthy depositors transferred big amounts of money abroad and expats stopped their cash injections to Lebanon amid political uncertainty.