Lebanon to devalue the pound by 90%, central bank governor says

The change, which will apply to banks, will take effect on Wednesday

A clerk counts Lebanese pounds at a currency exchange office in Beirut. AFP
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Lebanon will adopt a new official exchange rate of 15,000 pounds per US dollar on Wednesday, central bank governor Riad Salameh said, marking a 90 per cent devaluation from its current official rate that has remained unchanged for 25 years.

The shift from the old rate of 1,507 to 15,000 is still far off the parallel market, where the pound was changing hands at about 57,000 per dollar on Tuesday.

The change will apply to banks, Mr Salameh said, leading to a decrease in the equity of the institutions at the centre of the country's 2019 financial implosion.

Analysts expect the shift to have less impact on the wider economy, which is becoming increasingly dollarised and where most trading takes place according to the parallel market rate.

The pound has lost some 97 per cent of its value since it began to split from the 1,507 rate in 2019.

Mr Salameh told Reuters that commercial banks in the country would "see the part of their equity that is in pound decrease once translated into dollars at 15,000 instead of 1,500".

To ease the impact of this shift, banks would be given five years "to reconstitute the losses due to the devaluation", he said.

Mr Salameh said the change to 15,000 was a step towards unifying the country's multiple exchange rates, in line with a draft agreement Lebanon reached with the International Monetary Fund last year that set out conditions to unlock a $3 billion bailout.

Updated: January 31, 2023, 5:25 PM