The Lebanese Pound has had a relatively calm period but suddenly plunged lower against the dollar. The currency’s recent decline is the lowest, trading at 35,600 for a single dollar.
Financial analysts believe that the latest slide is an indication that the Lebanese economic challenges will worsen further.
Pound Continuous Depreciation
Lebanon’s ongoing economic woes are getting worse by the day, and the events of the alternative market point to more crises. The unofficial market exchange rate shows that the Lebanese Pound has plunged to its all-time low against the USD.
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A recent Al Jazeera document revealed that it took 14 days for the alternative market exchange rate to drop to its current position.
That is a drop from the previous 26,800 to reach the present rate. Meanwhile, at the time of publication, the official rate for the Lebanese Pound was 1,510 per dollar.
Although the country’s economic situation has been nothing but stable, the currency’s depreciation has worsened it. Lebanon faces more biting inflation due to its currency losing value quickly.
However, the Lebanese authorities cited global inflation as the reason for the current economic situation the country is battling. In the same breath, some economic experts point to local factors contributing to the deteriorating economic condition.
The inability of the financial regulators to initiate market policies relative to the country’s economic needs
A leading financial expert, Michel Kozah, disclosed that global price changes affect Lebanon by double. And that is because the financial regulators cannot protect the currency’s value.
A Possible IMF Bailout
The country had successfully halted the currency’s slide earlier in the year, albeit briefly. However, the limited resources available mean that the country cannot sustain the strategy for long.
To proffer solutions to the continuous slide, a newly elected politician, Mark Daou, proposes institutional reform. According to Daou, only a holistic reform of the financial system will bring about stability.
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Broader financial reforms are necessary to address the steady slide of the Lebanese Pound alongside judicial independence. The country cannot afford to keep on repeating the same thing over and over again.
Furthermore, the politician noted that the country has no chance of arresting the economic crisis without reform.
Meanwhile, Daou also suggests that the country implement new policies to make them eligible for the IMF’s assistance. The International Monetary Fund (IMF) provides bailouts to countries deep in economic woes, subject to some criteria.
These include strong capital control, banking confidentiality, independence of the judiciary, and other conditions.
However, as noble as the IMF intends to be for struggling countries, it has been accused of serving an agenda. The IMF bailout is designed to make developing countries highly indebted to it.
Additionally, developing countries find it difficult to free themselves from continuous borrowing once approved.
Meanwhile, countries choose which economic policies to pursue or whether to align with the conditions of the IMF.
Ultimately, Lebanon has a choice to make, and everything depends on the next action it takes.