Central Bank of Lebanon sets new withdrawal rate from dollar deposits

Monthly withdrawal ceiling of $3,000 equivalent in Lebanese pounds also set for account holders

The Lebanese pound has lost more than 90 per cent of its value against the US dollar on the black market. Reuters

The Central Bank of Lebanon set a new rate on Thursday for withdrawals from US dollar deposits in Lebanese pounds at 8,000 to the greenback.

The new withdrawal rate comes a year after the central bank issued circular 151 that allowed depositors to withdraw dollars, with the funds paid in the local currency at a rate of 3,900 pounds to the greenback. The central bank also set a monthly withdrawal ceiling of $3,000 equivalent in Lebanese pounds, according to Thursday's circular seen by The National.

Lebanon, one of the world's most indebted nations, had maintained a peg of 1,507.5 pounds to the dollar since 1997. The currency's value against the greenback plunged in 2019 as the government defaulted on about $31 billion of eurobonds, accelerating the country's economic decline into what the World Bank called last year a "deliberate depression".

The lender blamed the downward spiral on the inertia of a ruling political class that has consistently stalled reforms and the formulation of a roadmap that would unlock billions of dollars in international aid and help the country emerge from the crisis.

The currency has lost more than 90 per cent of its value in the black market, leading to a spike in inflation, shortage of food and medicine and a rise in unemployment and poverty. Inflation rose to about 174 per cent in October from the same month a year earlier, according to the country's Central Administration of Statistics. This was the 16th consecutive month of triple-digit inflation.

The central bank said it took the decision pending the "development of an integrated and comprehensive government plan in line with economic reform principles and the requirements of the International Monetary Fund to allow reactivation and growth of the local economy ... [that would provide] fair and balanced solutions and preserve the rights of depositors, restore confidence, [as it awaits] a government plan that allows for the unification of the exchange rate, protection of social stability and to reduce losses of depositors".

The central bank said the implementation of this decision will help to preserve the money of depositors and stressed the need to take appropriate measures to support the economy against rising inflation.

Lebanon, which has more than $98bn in public debt, approached the IMF last year for a $10bn bailout package. While stalled talks with the IMF began after the formation of a new government under Prime Minister Najib Mikati this fall, no agreements have been reached.

Last month, Egypt said it would to start supplying gas to Lebanon by early next year, to help ease the power crisis in the country, which led to a total blackout in October as the two power stations supplying the national grid ran out of fuel.

The country's private sector continued to shrink in November, as output and new orders declined to a nine-month low owing to political and economic instability, according to the Blom Lebanon PMI survey released this week.

The index fell to 46.1 in November, from 46.6 in October, well below the neutral 50 mark that separates growth from contraction.

Lebanon's economy contracted 25 per cent last year and the country's crisis ranks among the world’s top 10 crises – possibly even the top three – since the mid-19th century, according to the World Bank.