Poverty is spreading and the economy from the | Phalanges

Rana Sarti wrote in Al-Gomhoria newspaper

A year has passed since the outbreak of the financial and economic crisis, which turned the situation upside down, and surprised even those concerned and those directly and indirectly responsible for it. The banking system based on financial transfers from abroad fell more quickly than expected, and it was forced to withhold the dollars of its depositors due to the loss of liquidity in foreign currency, and the Lebanese economy turned into a monetary economy that relied only on cash to complete commercial transactions. Latest innovation: Bira bank lira similar to Lollar bank dollar.

From October 17, 2019 until today, Lebanon is witnessing an accelerating economic collapse that has led to an increase in the severity of the economic downturn from 7 percent to 30 percent, and a decline in GDP from 52 billion dollars in 2019 to 31 billion dollars in 2020, and the rate of inflation increased. In the consumer price index, it reached 91.3 percent, compared with 2.9 percent in 2019.

The Central Bank’s foreign currency reserves were completely depleted due to the continuation of the policy of supporting the import of basic commodities at the official exchange rate, which led to the decline of the Central Bank’s foreign currency assets to the mandatory reserve limits of banks below $ 17.5 billion compared to $ 30 billion in 2019. The percentage increased. Public debt from GDP rose to 181 percent in 2020 compared to 177 percent in 2019, not because of the sustainability of public debt, but rather as a result of Lebanon’s failure to pay its external debt in March 2020 and its cessation of paying Eurobonds.

The most prominent and important collapse that resulted from the explosion of the crisis was the deterioration of the exchange rate of the lira against the dollar by more than 70 percent, reaching in some periods to the limits of 10,000 pounds against the dollar and retreating to about 8,000 pounds now, while the annual inflation rate rose to record levels. At 450 percent, Lebanon is ranked second in the world after Venezuela.

As a result, the purchasing power of the Lebanese citizen collapsed, the percentage of the poor doubled to reach 55 percent in 2020 compared to 28 percent in 2019, and the percentage of those suffering extreme poverty increased threefold, from 8 to 23 percent.

In light of maintaining the official exchange rate at 1507 pounds against the dollar in the banking sector, the dire financial and monetary situation led to the existence of different exchange rates in the market in addition to the official price, which are: the platform price set by the Banque du Liban at 3,900 pounds, the black market price at 8,000 Currently, the purchase price of dollar checks is 3000 pounds. There are also four currencies under circulation in the market, which are: the real cash dollar, the fake dollar that is held in banks (lollar), the real cash pound, and the lira withheld in banks (Bira / bank lira), which were recently introduced after the Banque du Liban restricted cash withdrawals. It has set limits for bank cash withdrawals in Lebanese pounds from the Central Bank.

Despite the central bank’s assertion that this type of measure is by its nature a temporary measure imposed by exceptional situations, and the central banks of the world resort to it to combat inflation and the excessive rise in the prices of goods and services, without failing to meet the overall needs of the local market for liquidity, but the scarcity of liquidity in the lira In the market, in light of the scarcity of liquidity in dollars as well and the increase in demand for it, it will lead to more economic contraction because it will disrupt the economic cycle and reduce imports by a greater rate than it reached at 50 percent compared to last year, and as a result, it will reduce the volume of consumption.

In this context, former Economy Minister Sami Haddad described the measure taken by the Banque du Liban, by restricting cash withdrawals, as “very miserable and short-term,” noting that its aim is to artificially maintain the exchange rate of the lira against the dollar. He explained to Al-Gomhoria that this measure will result in a further deterioration in economic activity, “and instead of stimulating and revitalizing the economy, restricting withdrawals in the pound will lead to further contraction,” considering that these measures are very far from the horizon of the solution represented by the influx of billions of dollars into Lebanon And that is by reaching an agreement on a rescue program with the International Monetary Fund.

For his part, financial expert Walid Abu Suleiman confirmed to Al-Gomhoria that the aim of restricting cash withdrawals in Lebanese pounds is to curb domestic consumption, reduce the volume of imports, prevent more dollars going abroad, and preserve the remaining foreign currency reserves of the Banque du Liban for a longer period. He explained that restricting withdrawals in pounds came in parallel with the Central Bank’s request for importers of subsidized goods to pay the value of import bills in pounds in cash, which would naturally lead to a shortage of consumables and a loss of goods from the market more than what is happening today, and to more economic downturn.

Abu Suleiman indicated that as a result, there will be accumulated liras in banks and fresh lira. “The sale and purchase of bank checks in pounds in exchange for a cash lira has started at a price ranging between 10 to 15 percent of its actual value.” He stressed that the house dollars will remain stored and will not be used, regardless of any ceilings set for cash withdrawals in lira.