The money changers on Beirut's busy Damascus Street usually are full of customers swapping sought-after dollars for the embattled national pound, which has lost 97 per cent of its value since Lebanon’s economic crisis started in 2019.
But on Thursday, the street was quiet with the doors to most of the money dealers shut tight.
Money changers and their cash counters have become a central plank of Lebanon’s daily life, as one of the only ways to obtain US dollars in the economically devastated country or to swap the hard-won greenback for pounds; they form the so-called black market — or parallel market.
Unlike official rates fixed by the central bank, the price at the exchanges — hovering around 63,000 Lebanese pounds against the US dollar on Thursday — is the most representative of the actual value of the currency.
The official rate, largely redundant since 2019, was officially devalued for the first time in 25 years on Wednesday to 15,000 Lebanese pounds to the dollar.
What is happening?
Lebanese officials have repeatedly blamed money changers for the wildly fluctuating value of the pound as the economic crisis has deepened.
Central bank chief Riad Salameh in December blamed “speculation and smuggling” at Lebanon’s borders for the surging inflation rate, which hit 189.4 per cent in the 11 months to October last year.
There have been repeated crackdowns on cash exchanges.
At the onset of the crisis in 2019, the financial prosecutor arrested Mahmoud Mrad, head of the Syndicate of Money Changers, for “playing with the market”.
The state-run telecoms operator banned several widely used websites that show live parallel-market rates.
As the currency fell to unprecedented lows against the dollar in recent weeks, changers are being targeted on the grounds that they are again speculating and driving up inflation.
On Wednesday, the police arrested two people in Baalbek after a raid on an unlicensed operation for “practising illegal money-exchange operations”, the state-run National News Agency reported.
Fear of a new wave of government reprisals led most of Damascus Street's operators to shut up shop, said one of the few traders still open on Thursday morning.
“Most money changers are closed today because they are scared of police raids and being thrown in jail," he explained.
“I don't even know what is happening and if the threat is real."
Chaos and rumours
Such is the chaos that on the parallel market, even money changers are confused.
So far, OMT and BOB Finance — the two main exchange houses with hundreds of outlets around Lebanon that work directly with the central bank — have not been targeted.
There used to be a third, CTEX, but the central bank revoked its licence after it had sanctions imposed by the United States over alleged links to Iran-backed Hezbollah, the powerful Lebanese political party and armed group.
As rumours of more action against exchanges spread this week, there were also reports that the central bank had withdrawn OMT’s licence.
With between 15 and 30 per cent of Lebanese households relying on remittances from abroad to survive — totalling $6.6bn in 2021 — OMT is often busy handing out money transfers sent from family members overseas.
But one OMT agent in Beirut said reports they'd lost their licence were “fake news”.
For the hundreds of smaller operators that have sprung up to provide the vital service, some regulated by the central bank and others not licensed at all, it's not clear what is happening.
The OMT agent said only the exchanges with no licence would be shut down by the government.
In downtown Beirut, one exchanger who was still open on Thursday pointed his permit out on the glass screen that separated him from his customers.
“We have a licence,” he said.
Yet another who had told The National he was licensed was closed on Thursday.
A scapegoating strategy
Experts, however, say that accusing changers of gambling on the value of the pound is only an attempt to scapegoat them for the soaring inflation.
“The speculation on the rate is only a consequence of the multiple exchange rates," said one financial executive.
As well as Lebanon's new official exchange rate of 15,000 and the parallel rate on the street of close to 65,000, there is also the Sayrafa rate, an official platform managed by the central bank that is currently trading at 38,000.
For those able to access the Sayrafa, they can trade these at 65,000 to profit from the collapsing pound.
“But they are not the cause of inflation, saying otherwise is only a way to deflect responsibility from the authorities," added the financial executive.
He said such trading only underlined the "authorities' incompetency to deal with the crisis".
The UN says Lebanon’s economic crisis, which has plunged 80 per cent of the population into poverty, is “man-made”, with the long-standing ruling elite unable to implement much-needed reforms to lift the country out of its predicament.