By Rita Azar
The Lebanese currency has severely depleted in value during the last few months. Although many politicians claim that the lira will stabilize at 3000 to a dollar, the currency crisis continues to rock the finances of Lebanon. Ever since 1990, 1500 liras have always equaled a dollar. Although this is a far cry from 1980 when three liras equaled one dollar, the instability of the lira from 1990 on is treacherous to the economy. The worst the conversion rate has ever been was when the dollar reached a staggering 12000 liras.
One must grasp the country’s financial decisions to understand what led to the economic collapse. Lebanon’s broken electricity, water, and waste collection systems has cost the country billions of liras of debt. Before the early 2000s, most of Lebanon’s debt was local; this means that, theoretically, the debt could be paid off by simply printing more lira, which the central bank has the power to do. But after the former prime minister, Fouad Siniora, took billions of dollars worth of foreign loans in 2007, Lebanon needed to collect foreign currency to pay for the debt debt. On top of this, Lebanon’s economy damaged by an immense decrease in tourism and foreign investments. Due to this, Lebanon has used the little foreign money that still exists in the central bank to pay off its foreign debts which leaves the citizens and companies of Lebanon unable to withdraw dollars from their bank accounts.
Due to foreign currencies being rare to find in Lebanon’s economy, they have become far more expensive. In addition, because of the abundance of Lebanese liras, the lira has fallen dramatically in value. This has led to massive gouging by all types of businesses that need to import with foreign currencies that are no longer accessible. In response, the government and central bank have taken measures to stop the massive inflation of the lira. One method is keeping the official rate, 1500 lira to one dollar, from small scale transactions and being a little more lenient with larger transactions by offering a rate of about 4000 lira to a dollar.
But, this means that the Lebanese people are losing money when exchanging foreign currency into lira. This has led many people living in the country to go to the black market to exchange money with rates other than the governmental regulations. While the black market approach has allowed many Lebanese people to get their money’s worth, it has caused the government to enforce stricter exchange rates to control inflation and ban the black market.