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Lebanon: Govt Seen Backtracking from FX Move

Lebanese pound banknotes are pictured at a currency exchange shop in Beirut, Lebanon, January 5, 2022. REUTERS/Mohamed Azakir
Lebanese pound banknotes are pictured at a currency exchange shop in Beirut, Lebanon, January 5, 2022. REUTERS/Mohamed Azakir
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Lebanon: Govt Seen Backtracking from FX Move

Lebanese pound banknotes are pictured at a currency exchange shop in Beirut, Lebanon, January 5, 2022. REUTERS/Mohamed Azakir
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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Egypt Approves $91 Billion Budget for 2025/26

The sun rises in Cairo, Egypt March 25, 2025. (Reuters)
The sun rises in Cairo, Egypt March 25, 2025. (Reuters)
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Egypt Approves $91 Billion Budget for 2025/26

The sun rises in Cairo, Egypt March 25, 2025. (Reuters)
The sun rises in Cairo, Egypt March 25, 2025. (Reuters)

Egypt's cabinet approved a 4.6 trillion Egyptian pound ($91 billion) draft state budget for the financial year that will begin in July, a government statement said on Wednesday, as it continues to tighten its finances under an IMF program.

Expenditures will rise by 18% and revenue by 19% over the current 2024/25 budget. Revenue is expected to hit 3.1 trillion pounds, working out to a deficit of about 1.5 trillion pounds ($30 billion).

The increased expenditure partly reflects elevated headline inflation, which was running at an annual 12.8% in February.

Financial reforms under an $8 billion financial reform program signed in March 2024 with the International Monetary Fund have helped Egypt bring inflation down from a peak of 38% in September 2023.

The IMF this month approved the disbursement of $1.2 billion to Egypt after its fourth review of the program.

The new budget targets a primary surplus of 795 billion pounds, equal to 4% of GDP, up from the 3.5% primary surplus originally targeted in the 2024/25 budget.

The IMF granted the government a waiver in the fourth review after the surplus came in 0.5% of GDP lower than Egypt's earlier commitment.

In its third review in June, the IMF praised Egypt for its "strict control of spending".

The new budget also lowers public debt to 82.9% of GDP from an expected 92% in 2024/25, the cabinet statement said.

The cabinet said 732.6 billion pounds in spending in the new budget would be allocated for subsidies, grants and social benefits, an increase of 15.2%.

The budget increases commodities and bread subsidies by 20% to 160 billion pounds. It will also include 75 billion pounds to subsidize petroleum products, 75 billion pounds to subsidize electricity and 3.5 billion pounds to subsidize natural gas deliveries to households, the statement added.