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Lebanon: Govt Seen Backtracking from FX Move

Lebanon: Govt Seen Backtracking from FX Move

Thursday, 29 September, 2022 - 13:15
Lebanese pound banknotes are pictured at a currency exchange shop in Beirut, Lebanon, January 5, 2022. REUTERS/Mohamed Azakir

The Lebanese finance ministry seemed on Thursday backing away from a Nov. 1 start date to slash the official exchange rate.


The ministry said on Wednesday the official exchange rate of 1,507 pounds per dollar would be replaced with one of 15,000, calling this a step towards unifying multiple rates that have emerged during Lebanon's three-year long financial crisis.


But after declaring a Nov. 1 implementation date, the ministry later linked the step to approval of a financial recovery plan, the latest version of which is being discussed in parliament.


Some economists and politicians saw this as a government retreat: the recovery plan, which must address a $72 billion hole in the national finances, has been in dispute since 2019.


The pound's market value currently stands at 38,000 to the dollar, a devaluation of more than 95% since Lebanon collapsed into a financial crisis that has plunged swathes of the population into poverty.


Finance Minister Youssef Khalil could not be reached for comment. In a Reuters interview on Wednesday, he said the change was agreed with the central bank and would be discussed with stakeholders over the next month before implementation.


Ibrahim Kanaan, a senior lawmaker in President Michel Aoun's Free Patriotic Movement, told Reuters amending the official rate was necessary "but not in this way".


"I want to check if he will follow through on this or has to amend it a bit, because you cant do it this way," he said.


A finance ministry official referred Reuters to a statement late on Wednesday that said the move to a new official exchange rate was "conditioned on the approval of the recovery plan that is being worked on, and which should accompany that step".


Central bank governor Riad Salameh, in a text message to Reuters late on Wednesday, said implementing the decision "will require time", without elaborating.


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