Currency Collapse Heaps More Misery On Lebanese As Prices Skyrocket

The Lebanese pound on Monday lost more ground against the US dollar, adding to the misery of the growing number of people struggling to make ends meet in the country.

After meeting President Michel Aoun on Saturday, prime minister designate Mustapha Adib said he was "excusing" himself from the task of forming a government and apologised to the Lebanese people for his "inability to realise its aspirations for a reformist team" to save the country.

Just moments after the Adib announcement, the US dollar surged from LBP7,700 to LBP8,100.

The pound started the week with a further deterioration in the black FX market. Money exchangers were buying the dollar from customers for around LBP8,500 and told potential buyers they don’t have dollars to sell. The dollar traded around LL8,100 on Saturday and LBP7,700 on Friday.

The Lebanese pound's depreciation of more than 80 percent in less than a year has left consumers struggling to buy their basic goods

Licensed exchangers were selling the dollar for LL3,900 and buying it for LL3,850, a rate set by the central bank that has remained unchanged for months, while the official rate stood at LBP1,517 per US dollar.

Despite the country's economic collapse and near bankruptcy, political progress has crawled to a stop.

French President Emmanuel Macron on Sunday attacked the entire Lebanese political class, and warned of a new civil war if they can’t set aside personal and religious interests to unlock international aid and save Lebanon from economic collapse.

Pressures increased on the pound after Lebanon’s Central Bank governor Riad Salameh announced plans to transfer the subsidy from importers to citizens amid dwindling liquid FX reserves, as only $2 billion of the central bank’s liquid FX reserves can be used to finance trade.

The collapse of the currency in the parallel market and the associated skyrocketing inflation to a record 120 percent by the end of August are also fuelling a highly unstable environment.

The resulting erosion of consumers' purchasing power and wealth levels, accompanied by investment contraction, is deepening the expected double-digit economic slump in 2020 and setting the stage for severe social disruptions.

The Lebanese pound's depreciation of more than 80 percent in less than a year has left consumers struggling to buy their basic goods, as prices rose dramatically between Saturday and Monday.

One shopper told Arabian Business: "In the past, I used to buy what I needed in an hour or less. Now I need more than two hours, because of the high prices, so I choose the lowest price, regardless of quality or brand, and prices change from day to day depending on dollar price changes. If I had enough money, I'd have bought more items because I know their prices will rise tomorrow."

Shoppers said they were shocked to find that even the prices of vegetables and fruit grown in Lebanon have increased dramatically, with many basic items disappearing from supermarket shelves altogether.

Eggs are one example: Lebanese farmers explained they are not producing as many as in the past due to the reluctance of the banks to release funds to buy raw materials.

“We need money to buy fertilisers and other materials to use on farms. Many farms have closed down temporarily because farmers can’t get access to fertilisers, so we can’t sell a box of 30 eggs at the official price set at LBP12,500. The minimum price should be LBP15,000 at least,” a farmer told Arabian Business.

Prices of certain products also vary from one supermarket to another, in the absence of effective monitoring by the Ministry of Economy to control prices.

“The continuous rise of the US dollar against the Lebanese Pound is the main reason for the increase in the prices of imported goods. Today we buy the dollar at the rate of LBP8,500, so we updated our prices to match the change in the dollar exchange rate,” said a supermarket owner in Achrafieh, Beirut.