BEIRUT (Reuters) — Lebanon’s battered pound currency has slid to fresh lows against the US dollar despite a new pricing system Beirut hopes can rein in soaring food prices as it negotiates a deal with the International Monetary Fund to climb out of crisis.
The pound has lost over 60 percent of its value since October, the result of a dwindling stock of dollars that has prompted banks to cut savers’ access to hard currency and ration dollars exclusively for fuel, medicine, and wheat at a pegged rate of 1,507.50 pounds.
One currency dealer said dollars on Wednesday were being bought at 4,250 and sold at 4,500. A second dealer said he was buying at 4,300 versus 4,100 a day earlier but not selling because of scarcity.
Importers said it was getting increasingly difficult to source enough dollars to complete orders, even at higher rates.
“Looking forward only a few weeks ahead, we may not be able to honor our engagements towards our suppliers,” said Hani Bohsali, general manager of Bohsali Foods, a major food importer.
The government and money changers last week launched a unified pricing system, with a gradually reduced rate announced each day with the aim of reaching 3,200 pounds.
As part of the scheme, money changers on Wednesday set a buying price of 3,890 and selling price of 3,940 and the central bank said dealers who did not comply would be penalized. Importers said dollars at this rate were unavailable.
The central bank said on Wednesday a new electronic foreign exchange trading platform would go live on June 23 as part of further efforts to stabilize the currency.
Under the new platform money changers will be required to enter the details of transactions into an electronic application and adhere to a buying and selling range set each morning by the central bank and subject to change throughout the day.
Lebanon’s dollar supply has been further hit by a currency crisis in neighboring Syria. Syrians are piling into dollars to protect against inflation and hedge against the effect of impending US sanctions.
The Lebanese pound’s collapse has threatened renewed unrest as Beirut negotiates an IMF program tied to billions of dollars in financing to kickstart a recovery.
Fresh protests erupted late on Tuesday in Beirut and Tripoli, triggered in part by the currency crisis.
Reporting by Eric Knecht and Tom Perry; Editing by Gareth Jones/William Maclean
Image: A man counts US dollar banknotes next to Lebanese pounds at a currency exchange shop in Beirut, Lebanon April 24, 2020. (REUTERS/Mohamed Azakir/File Photo)