The Lebanese central bank set an exchange rate of 3,625 Lebanese pounds per dollar to be applied by money transfer companies on Friday, a central bank source said.
This came as the local currency hit a new low amid financial turmoil in the crisis-hit country compounded by the coronavirus outbreak.
“Prices may change every day and will be set the day before,” the central bank source said, adding that the rate was based on the price dollars were fetching at foreign exchange offices.
“In the event that there are major fluctuations during the day, the price may be set again during the same day,” the source added, Reuters reported.
It was not immediately clear if the rate announced on Friday would be applied by commercial banks for such withdrawals.
The currency crash came as hundreds of Lebanese crowded outside money transfer offices Thursday, the last day that authorities allowed dollars to be dispensed to customers following new Central Bank rules.
The new rules, detailed in a bank circular released this week, require banks to convert cash withdrawals from foreign currency bank accounts to the local currency, the Lebanese pound, at market rates determined daily by the bank.
However, hundreds of protesters took to the streets in Beirut and other cities to denounce the policies of the Central Bank, ignoring regulations for social distancing because of the virus.
Parliament speaker Nabih Berri also urged the government on Thursday to use its legal powers to halt the “dramatic collapse” of the country’s pound currency before it is “too late”.
The change is meant to ease demand on the dollar but has instead caused panic among the Lebanese.
In Lebanon, people have relied on a stable national currency that has been pegged to the dollar for nearly 30 years.
The tiny Mediterranean country of about 5 million people has a large diaspora that sends foreign currency home or relies on transfers from here to students abroad. Also, many Lebanese keep their savings in foreign currency, the Associated Press reported.
The Lebanese pound traded between 3,500 and 3,700 to the dollar on Thursday, a sharp jump amid general currency depreciation that began in March. It had been pegged to the dollar at 1,500 pounds since 1990, the end of the country’s civil war.
For her part, Maha Yahya, director of the Beirut-based Carnegie Middle East Center, said the new rules are an effective float of the currency but it is not yet clear how the banks will implement them.
“Practically they are admitting the market rate. The problem is when you do it on its own without a broader financial package, and not part of a larger financial and economic rescue package, you are basically triggering a rapid inflation,” Yahya said.
The dollar is expected to continue to rise “so everybody now is hedging their bets and waiting," Yahya warned.
Lebanon is facing its worst economic crisis in decades, including unprecedented unemployment levels and a severe liquidity crunch. The crisis has been compounded by a nationwide general lockdown, in place for over a month, to combat the spread of coronavirus.
Prices of basic goods have soared— sugar for instance has gone up by nearly 67 percent. Consumer groups recorded a general 58% price increase on basic commodities since October.