Lebanon will begin employing a new official exchange rate of 15,000 Lebanese pounds to the dollar as opposed to the now-obsolete rate of 1,507 to the dollar by end of October, Reuters reported on Wednesday, citing the country's caretaker finance minister, Youssef Khalil.
Raising the official exchange rate would be a step towards unifying the country's multiple exchange rates, Mr Khalil told Reuters, at a time when the struggling nation's currency has devalued to just a fraction of what it was worth three years ago.
The step will come into effect from the end of the October, Mr Khalil said.
He added that the government would explain the move to the public over the next month prior to abolishing the 1,507 Lebanese pound rate.
The official rate has been set to 1,507 Lebanese pounds for twenty-five years, since 1997. But the Lebanese pound has plummeted in value by over 95 per cent since unpegging from the official rate three years ago, when the country fell into a severe financial and economic crisis.
The currency is currently worth over 38,000 Lebanese pounds to the dollar on the parallel market, which reflects the real value of the dollar.
Earlier this week parliament approved the 2022 state budget, which controversially applied the 15,000 rate to customs taxes. Mr Khalil said the move paved the way for the decision to increase the official exchange rate.
Although unifying the various exchange rates currently in use is one of several pre-conditions by the International Monetary Fund to secure a financial bailout package, experts worry the rise in the official rate without the employment of a financial recovery plan or adequate social protections will further hurt Lebanon's economically vulnerable population.
Economist Henri Chaoul, a former adviser to Lebanon’s finance ministry and a former member of Lebanon's IMF negotiating team, called the rise in the official rate a misguided and possibly illegal move.
"No one has the authority to change the exchange rate except parliament," he told The National.
"This will have an inflationary impact and lead to further depreciation," he added.
More than 80 per cent of Lebanon's population has been driven to poverty by the financial crash, while commercial banks have imposed informal capital controls that have locked much of the population out of the full dollar value of its savings.
Last week, the IMF said Lebanon's progress in implementing reforms remained very slow, and called for the implementation of a "realistic exchange rate."
