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Lebanon’s Currency Hits Record Low, Inflation Exceeds 500%

Lebanon’s Currency Hits Record Low, Inflation Exceeds 500%

Tuesday, 2 March, 2021 - 12:15
Volunteers wearing protective masks and gloves sort boxes with food for distribution to people in need, in Beirut, Lebanon May 29, 2020. REUTERS/Aziz Taher

The Lebanese currency continues to fall against the US dollar, registering its lowest value this week in the parallel market, along with a sharp rise of fuel prices and inflation exceeding the alarming rate of 500 percent.

In remarks to Asharq Al-Awsat, economic experts and analysts talked about serious indicators that point to the acceleration of a new and high inflationary wave that is likely to further destabilize the fragile living balance.

Analysts agreed on linking three main factors, which are formally separate but implicitly connected, which together will accelerate the country’s slide into harsher collapses.

First, analysts pointed to the loss of the executive authority, between a caretaker government with narrow capabilities and a new government headed by Prime Minister-designate Saad Hariri, the birth of which is still encountering complex difficulties.

The second factor is the imminent halting of government subsidies due to the depletion of the Central Bank’s foreign reserves, in parallel with the delay in approving the subsidy rationalization plan that ministerial and administrative committees have worked on completing weeks ago.

As for the third factor, analysts told Asharq Al-Awsat that it is represented by the end of the deadline for increasing the capital of the banking system at the end of March, which will cause additional pressure on currencies in the parallel markets.

Furthermore, the latest data issued by the Central Administration of Statistics showed an increase in the price inflation index by about 146 percent.

The prices of hotels and restaurants increased by 609 percent, clothing and shoe prices increased by 560 percent, while food prices increased by 60 percent. In addition, transportation prices increased by 206 percent, while furniture, household appliances, and household maintenance increased by 655 percent.

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