Lebanese pound sees end of dollar peg
The six exchange-rate system is now untenable, with the currency losing more than 50% of its value since October, but analysts say floating the currency will cause more pain without IMF support.
Masked men recently bore a coffin adorned with the Lebanese pound in the city of Zahlé as people protested against years of corruption and mismanagement that have led Lebanon to economic collapse. In Sidon, people waved flags atop their cars on Labour Day.
The Lebanese pound, which has been pegged to the dollar since 1997, has lost 50% of its value since October, causing food and essential goods prices to soar. It is the latest sign that the government’s inability to enact reforms is having real consequences for Lebanon’s population.
On April 30, prime minister Hassan Diab published a 53-page financial recovery plan that, alongside structural reforms and changes to the banking system and central bank, includes allowing the Lebanese pound to adjust to market rates, estimated to be L£3,500 to the dollar.
“The peg to the US dollar that has been maintained over decades is now impossible to restore and must be revamped,” the plan says. “For years the lack of competitiveness of the Lebanese companies has prevented the emergence of a productive and diversified economic base in Lebanon and encouraged the consumption of imported goods through artificially inflated purchasing power.”