Lebanon Central Bank to Unify Parallel FX Rate, Let Small Depositors Cash out

People queue outside a bank in Beirut on March 29, 2020. (AFP)
People queue outside a bank in Beirut on March 29, 2020. (AFP)
TT
20

Lebanon Central Bank to Unify Parallel FX Rate, Let Small Depositors Cash out

People queue outside a bank in Beirut on March 29, 2020. (AFP)
People queue outside a bank in Beirut on March 29, 2020. (AFP)

Lebanon's central bank said on Friday it was launching a foreign exchange unit to centralize the price of dollars for money-changers, part of efforts to rein in the parallel market as hard currency runs short amid a deepening financial crisis.

In a separate circular, it said deposits of $3,000 or less could be withdrawn in Lebanese pounds at a "market" rate, allowing small depositors to cash out despite tight banking controls.

The measure could relieve many Lebanese depositors who have had to stand by as the value of their savings tumbled, hit by price hikes, a weakening currency and withdrawal caps as little as $100 a week.

While neither circular defined the "market" rate, analysts said it would likely reflect the parallel market, where the pound has traded around 2,800 pounds to the dollar, nearly 50% weaker than the official peg of 1,507.5 in place since 1997.

The currency has come under even more pressure during Lebanon's coronavirus lockdown, with banks halting access to already scarce dollars.

Central Bank Governor Riad Salameh told Reuters the peg would remain in place for bank transactions and critical imports - wheat, medicine and fuel. "We will choose the dealers with which we transact. We work on banknotes only at market rate. We buy and sell," Salameh said of the new FX unit.

Two government sources said about 60% of all bank accounts would be allowed full withdrawal. The sources said dollar deposits covered by Friday's directive amount to some $350 million.

"This is a boost for small depositors, to their purchasing power," said Nassib Ghobril, chief economist at Byblos Bank.

Ghobril said the FX measures were a "temporary" fix to address liquidity problems until the government secures badly needed foreign aid under a broad rescue plan.

Last month, Lebanon declared it could no longer pay its hefty foreign debt and launched talks with creditors.

The currency has slumped since October, after capital inflows dried up and protests erupted against the ruling elite.

Authorities sought in recent weeks to enforce a rate of 2,000 pounds per dollar on the parallel market, now people's main source of cash. Traders still sold at higher rates, with some shut down.

Friday's measures also allow paying out deposits of 5 million Lebanon pounds or less. It said this would be done by converting the funds first to US dollars at the peg and then to Lebanese pounds at the day's market rate.



Oil Set for Steepest Weekly Decline in Two Years as Risk Subsides

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
TT
20

Oil Set for Steepest Weekly Decline in Two Years as Risk Subsides

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices rose on Friday though were set for their steepest weekly decline since March 2023, as the absence of significant supply disruption from the Iran-Israel conflict saw any risk premium evaporate.

Brent crude futures rose 50 cents, or 0.7%, to $68.23 a barrel by 1036 GMT while US West Texas Intermediate crude gained 49 cents, or nearly 0.8%, to $65.73.

During the 12-day war that started after Israel targeted Iran's nuclear facilities on June 13, Brent prices rose briefly to above $80 a barrel before slumping to $67 a barrel after US President Donald Trump announced an Iran-Israel ceasefire.

That put both contracts on course for a weekly fall of about 12%.

"The market has almost entirely shrugged off the geopolitical risk premiums from almost a week ago as we return to a fundamentals-driven market," said Rystad analyst Janiv Shah.

"The market also has to keep eyes on the OPEC+ meeting – we do expect room for one more month of an accelerated unwinding basis balances and structure, but the key question is how strong the summer demand indicators are showing up to be."

The OPEC+ members will meet on July 6 to decide on August production levels.

Prices were also being supported by multiple oil inventory reports that showed strong draws in the middle distillates, said Tamas Varga, a PVM Oil Associates analyst.

Data from the US Energy Information Administration on Wednesday showed crude oil and fuel inventories fell a week earlier, with refining activity and demand rising.

Meanwhile, data on Thursday showed that the independently held gasoil stocks at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub fell to their lowest in over a year, while Singapore's middle distillates inventories declined as net exports climbed week on week.

Additionally, China's Iranian oil imports surged in June as shipments accelerated before the conflict and demand from independent refineries improved, analysts said.

China is the world's top oil importer and biggest buyer of Iranian crude. It bought more than 1.8 million barrels per day (bpd) of Iranian crude from June 1-20, according to ship-tracker Vortexa, a record high based on the firm's data.