Panicked… The Lebanese Hide a Billion Dollars Inside Their Homes

A man counts Lebanese pounds at an exchange office in Beirut, Lebanon, August 16, 2018. REUTERS/Mohamed Azakir

One concern is currently preoccupying the Lebanese. It is not politics or security, but the economic situation. It is threatening their daily living because their national currency is menaced.

While Banque du Liban (BDL) maintains the local currency stability at LBP 1510 per USD, this figure is considered by some economists to be “illogical”. A parallel market has emerged, where the dollar value has reached in some exchange offices about LBP 1650.

Practically, a Lebanese banking source told Asharq Al-Awsat that there was no real pressure on the Lebanese pound in the market, adding that the Central Bank was not interfering greatly to maintain the stability of the national currency.

However, the source admits that there is a “scarcity” of cash in the Lebanese market that has led banks to adopt some necessary measures. This situation has raised panic among the people, who began, months ago, to store the currency in their homes. Economic Expert Prof. Jassem Ajaka estimated those amounts at around $2.5 billion.

Central Bank Governor Riad Salameh has reiterated on several occasions that there was no “dollar crisis.” He noted that banks were meeting customers’ demand for US dollars, with the possibility of withdrawing from ATMs in most banks.

“The dollar is available in Lebanon, and what we see on social media, and sometimes the media, is exaggerated and has its objectives,” Salameh told a news conference. He noted that any procedures for ATMs are due to the policy of each bank separately, adding that any transaction that the customer cannot make through ATMs can be done through the bank’s outlets.

Salameh asserted that BDL had reserves that exceed $38.5 billion and that there was no need for exceptional measures.

The cash crisis is partly due to the US-led economic war against Hezbollah’s funding. The party deals mainly with cash to circumvent US financial constraints.

A Lebanese minister told Asharq Al-Awsat that there were two main sources of currency withdrawals from the Lebanese banking sector, namely Syria and Hezbollah. Restrictions on the Syrian financial system are being vented through the Lebanese banking system, and Hezbollah has instructed some of its close associates to it to withdraw their money from banks in anticipation of US sanctions.

Sources with knowledge of the matter said that the US Assistant Secretary of Treasury for Money Laundering and Terrorist Financing Marshall Billingslea has warned some Lebanese banks against deliberately selling the dollar to the Syrian traders, who are on the sanctions list for using it in one way or another for import. He also denied that the US sanctions were the cause of this crisis.

On the other hand, Economic Researcher Dr. Mounir Rashed, linked the current crisis to the accumulation of several factors, including the recession that hit the Lebanese economy since the start of the Syrian war, the closure of transport routes, the decrease of tourism because of the security situation, in addition to the local financial situation that recorded a large deficit due to the decline of state revenues and the rise of expenditures.

Also, according to Rashed, rising deficits and public debt have led to a decline in Lebanon’s sovereign rating, which in turn encouraged more capital to flee abroad, coupled with US sanctions and pressure on the Lebanese banking sector.

Economic Expert Dr. Pierre El-Khoury admits that there is “fear and terror today in the markets about the possibility of the collapse of the exchange rate of the Lebanese pound against the major international currencies, especially the dollar.”

This panic is attributed to the confusing behavior of banks with customers, the vague statements by the BDL and the proliferation of rumors on social media.

But apart from the panic, Khoury adds that the crisis has deep roots, as the balance of payments deficit and the depletion of Lebanon’s hard currency reserves can no longer be controlled.

“The exposure of the Lebanese economic model to the regional crisis, which does not appear to have a positive horizon, and the US sanctions on some Lebanese parties, will deepen the liquidity crisis further,” concluded Khoury.

Meanwhile, information available to Asharq Al-Awsat confirmed that the financial working group, headed by Prime Minister Saad Hariri and including Finance Minister Ali Hassan Khalil and Riad Salameh, has already begun to develop ideas and financial mechanisms, specifically aimed at fortifying the BDL’s foreign reserves, and re-correcting the balance of payments, which suffered a record deficit of nearly $6 billion in the first half of this year.

The working group is counting on the adoption of the draft budget law for 2020, as well as the results of Hariri’s foreign meetings, especially in Paris, as France is the sponsor and coordinator of the CEDRE Conference.

The Finance minister has acknowledged that Lebanon was in a “difficult economic and financial situation, but we are not a collapsed country.”

“At the financial level, we still have the capacity to meet the needs. Yes, there is no large amounts of foreign currency liquidity in the hands of people in the market, but the dollar exchange rate is still maintaining its ratio and position in banks,” he added.