Lebanon just can’t seem to catch a break. Lebanon’s currency situation is getting even worse and there’s no end in sight to this madness. To understand how bad it is, you need to understand some things about Lebanon’s financial past.
Pre crisis times, the Lebanese Lira was set at a rate by the government of 1500 LBP to 1 USD. Fixing a currency to any other currency can be a risky game as it can often not accurately reflect the true value and thus will create a black market for the ‘real’ rate of the currency. The government has now given into some of the inflation pressure and has decided to set the rate at 15,000 to 1 USD as the official rate. This however is still nowhere near the current black market rate which is now sitting at 80,000 to 1 USD, the worst ever.
To put it simply, a combination of factors in Lebanon led to people not having confidence in the value of the Lira and so investors pulled money out of the country. These factors included the collapse of the government, the Beirut port explosion, and spillover issues from the war in Syria, and then just to top it all off – everyone’s best friend Covid-19.
The currency basically went into free fall and people began withdrawing their money from the banks and exchanging it into the more stable USD. To stop people doing this the government has essentially blocked access to people’s bank accounts to stop them withdrawing all their money. Has this worked to stop the devaluation? No. Of course not. What it has done though is enrage an already fed-up population, leading them to take more and more drastic measures. One man held up a bank at gun point to try and get money to pay for his sick mum’s hospital bills, and more recently people in Beirut have been rioting outside the banks as the rate has fallen to historic lows.
Not only has the value of the Lira fallen to an all-time low of 80,000 to 1 USD, but the way the rate changes is insanely sporadic. To find out the rate you have to use a black-market app which updates the rate every few hours. When we were in Lebanon in May of 2022 the rate when we arrived was around 37,000 to 1 USD and then suddenly the next morning it was 26,000 to 1 USD. When we were back in October of 2022 the rate was back around 40,000 to 1 USD.
To this day the Lira has lost 95% of its value. This led to around 70% of Lebanon’s population being pushed under the poverty line in a matter of months. People in Lebanon are struggling, a feeling that they are unfortunately used to after years of civil war and a war with Israel. Unfortunately, no one can see a light at the end of the tunnel.
Restaurants now are increasingly putting prices in USD and the dollarisation of the country seems inevitable. At the time of writing this, the black market rate was 82,000 to 1 USD.
