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Lebanon Devalues Official Exchange Rate by 90%

A money exchange vendor holds stacks of Lebanese pound banknotes at a shop in Beirut, Lebanon January 19, 2023. (Reuters)
A money exchange vendor holds stacks of Lebanese pound banknotes at a shop in Beirut, Lebanon January 19, 2023. (Reuters)
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Lebanon Devalues Official Exchange Rate by 90%

A money exchange vendor holds stacks of Lebanese pound banknotes at a shop in Beirut, Lebanon January 19, 2023. (Reuters)
A money exchange vendor holds stacks of Lebanese pound banknotes at a shop in Beirut, Lebanon January 19, 2023. (Reuters)

Lebanon devalued its official exchange rate for the first time in 25 years on Wednesday, weakening it by 90% but still leaving the local currency well below its market value.

The pound has crashed since a financial meltdown in 2019 after decades of corruption, profligate spending and mismanagement by the ruling elite in Lebanon which has left the crisis to fester despite soaring poverty.

The central bank confirmed the new official rate of 15,000 pounds per dollar, scrapping the rate of 1,507.5 pounds at which the currency was pegged for decades before the collapse.

Market participants said the pound was changing hands at around 60,000 per dollar on Wednesday on the parallel market where most trades take place.

Lebanese officials have described the adoption of the new official exchange rate as a step towards unifying an array of rates that have emerged during the crisis.

Unifying multiple exchange rates is one of several steps sought by the International Monetary Fund for Lebanon to clinch a $3 billion aid package that would help it to emerge from the meltdown.

But the IMF said last year progress in implementing reforms remained "very slow", with the bulk yet to be carried out despite the gravity of a crisis marking Lebanon's most destabilizing phase since the 1975-90 civil war.

The new rate will be applied to limited withdrawals in local currency from US dollar accounts, from which depositors have been largely unable to withdraw hard currency since 2019.

It is also due to be applied to customs duties in the country that depends heavily on imports.

Continuing a ‘failed’ policy

Central bank governor Riad Salameh told Reuters on Tuesday the change would also lead to a decrease in the equity of banks.

In the absence of reforms to plug a $70 billion hole in the financial system, depositors have shouldered the burden of the collapse as they have been frozen out of their hard currency savings or forced to withdraw in pounds at a heavy loss.

Withdrawals in Lebanese pounds from hard currency accounts at the new official rate will still suffer a de facto haircut of 75% based on Wednesday's market rate.

Toufic Gaspard, an economist who has worked as an adviser to the IMF and to the Lebanese finance minister, said the move was not a major development in the bigger picture.

"Following the biggest banking collapse in modern history, nothing has been done for the last 3-1/2 years. Not a single significant measure has been taken by the authorities in the political, monetary and fiscal domains," he said.

"They are telling the poor depositors you will get a little bit more but then this is eaten up by inflation and taxes."

Nasser Saidi, a former economy minister and central bank vice governor, in a note said the move was a "continuation of (a) failed exchange rate pegging/fixing policy that has generated the biggest financial crisis in history".

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Business

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.

Business

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.

Business

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.