Is the Lebanese Pound at Risk of Devaluation?

A man walks past a money exchange in Beirut after Lebanon's central bank announced measures to facilitate access to dollars for importers of petroleum products, wheat, and medicine amid fears of a dollar shortage. AFP
A man walks past a money exchange in Beirut after Lebanon's central bank announced measures to facilitate access to dollars for importers of petroleum products, wheat, and medicine amid fears of a dollar shortage. AFP
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Is the Lebanese Pound at Risk of Devaluation?

A man walks past a money exchange in Beirut after Lebanon's central bank announced measures to facilitate access to dollars for importers of petroleum products, wheat, and medicine amid fears of a dollar shortage. AFP
A man walks past a money exchange in Beirut after Lebanon's central bank announced measures to facilitate access to dollars for importers of petroleum products, wheat, and medicine amid fears of a dollar shortage. AFP

Fears of a monetary devaluation in Lebanon, where the exchange rate has been fixed for more than two decades, are on the increase following a dollar shortage and the downgrading of the country's sovereign credit rating.

- Why the panic? -

Panic has gripped Lebanon in recent weeks when it became nearly impossible to withdraw dollars from ATMs or to change large sums in banks, AFP reported.

Since 1997, when the exchange rate was fixed at 1,500 Lebanese pounds to the dollar, the greenback has been used interchangeably with Lebanese pounds in everyday transactions.

That measure was adopted after several rounds of devaluations in the 1980s and after Lebanon 1975-1990 civil war.

But on the parallel market, exchange rates reached 1,600 Lebanese pounds to the dollar in September.

This depreciation and banking restrictions prompted calls for strikes, notably from gas station owners who receive pounds but would have to pay suppliers in dollars. The action was called off under a deal allowing payments in dollars.

After initially denying a dollar shortage, the central bank blamed the fluctuating exchange rate on increased imports, which observers say could be partly due to smuggling to neighbouring war-torn Syria.

But Lebanese economist Jad Chaaban points to a decision by banking authorities to control the flow of capital, including central bank "oversight to limit anyone exchanging dollars in banks, but also withdrawing large dollar amounts".

- Why did agencies downgrade Lebanon? -

The original rationale for banking restrictions was worry over revised ratings to Lebanon by the three major international credit agencies.

On Tuesday, Moody's announced it had put Lebanon's credit rating "under observation" with the possibility of a downgrade within three months. The agency downgraded Lebanon from "B3" to "Caa1" in January, signalling "a very high credit risk".

In August, Fitch downgraded Lebanon from "B-" to "CCC", a category for countries where there is a "real possibility" of default.

Standard & Poor's (S&P) kept Lebanon's "B-/B" rating but with a negative outlook, meaning it could slide over the next year, the agency's associate director of sovereign ratings Zahabia Gupta told AFP.

The Lebanese economy has suffered for years from low growth and a public debt swelling to around $86 billion. At roughly 150 percent of gross domestic product, this is one of the highest rates worldwide.

For the past year, Beirut has been trying to introduce economic reforms in order to unlock pledges of $11.6 billion in loans and grants from the international community.

This crucial aid has not been released due to delays in implementing reforms.

- Is the risk of devaluation real? -

Despite the worry, "there is no real risk today of a devaluation", according to economist Nassib Ghobril.

The central bank "has the necessary tools" to maintain monetary stability, said the chief economist at Byblos Bank.

These tools include sufficient foreign currency reserves to allow the bank to buy and sell currency to maintain the rate of the Lebanese pound.

At the end of September, foreign reserves reached $38.5 billion, an increase of over $2 billion since June, according to official figures, about four times the amount the country had in reserve in 2005.

According to AFP, another positive indicator for analysts are deposit inflows that can replenish foreign currency reserves. The central bank's inflows increased over three consecutive months between June and August, according to Marwan Barakat, chief economist at Bank Audi.

But observers remain cautious.

The increase in deposit inflows and central bank reserves "are primarily linked to the (central bank's) financial engineering and other one-off transactions and may not be sustained", warned S&P's Gupta.



IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.


Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.


Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.