As the economy worsens, Lebanese are juggling staggering exchange rates for devalued pounds

BEIRUT, March 19 (Reuters) – When Caroline Sadaka buys groceries in the Lebanese capital Beirut, she keeps her phone in her hand – not to check her shopping list but to calculate the rising costs of items now priced at unsustainable exchange rates that vary from store to store and sector.

As Lebanon’s economy continues to collapse, a range of exchange rates for the local pound has emerged, complicating personal accounts and dimming hopes of meeting a reform demand set by the International Monetary Fund.

The government’s official exchange rate was set at 15,000 pounds to the US dollar in February, a devaluation of almost 90% from the long-term peg of 1507.5.

But the central bank is selling dollars at a rate of 79,000 to the dollar, while the finance minister intends to calculate tariffs on imported goods at 45,000 pounds.

The parallel market rate, meanwhile, hovers around £107,000 and changes daily. Supermarkets and gas stations are required to post signs with the value they have chosen for the day, but the exchange rate changes so quickly that many instead price the relatively stable US dollar.

Examining a can of tuna, Sadaka illustrated the daily dilemma shoppers face. “This doesn’t have a (logical) price. If you look, is it in Lebanese pounds, is that the price? Or is it an old price and there is now a price in dollars?”, she wondered.

She quit her job as a school teacher, which paid her in local currency, whose value has fallen by more than 98% against the dollar on the parallel market since 2019.

It was then that the economy began to unravel after decades of unsound fiscal policy and alleged corruption.

To resolve the exchange rate confusion, the government must implement one unified exchange rate. This is among the conditions set by the International Monetary Fund almost a year ago for Lebanon to receive a $3 billion bailout.

But the lender of last resort says reforms have been too slow. They have met resistance from politicians who shield vested interests and avoid accountability.

Meanwhile, the country has moved towards a cash-based and dollarized economy given rising inflation and restrictions by banks on transactions.

Shop owner Mahmoud Chaar told Reuters that the exchange rate changed so quickly that his business lost money overnight.

Like many business owners, Chaar must pay in US dollars to import goods, but sells in Lebanese pounds. One day he had sold all his goods based on one rate, only to wake up the next to find it had risen almost 10,000 pounds per US dollar.

“Basically, in the exchange rate difference, we lost what we had made in profit,” Chaar told Reuters.

Economist Samir Nasr said the varying rates across sectors made personal accounting “messy” for Lebanese and that gathering them was more urgent than ever.

“What is required is a whole group of reforms and steps that will allow the overall economic situation to stabilize – and then allow the exchange rate to become uniform,” he said.

Reporting by Emilie Madi and Mohamed Azakir; Writing by Maya Gebeily; Editing by Cynthia Osterman

Our standards: Thomson Reuters Trust Principles.

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