Lebanon's Currency Plummets to Worrying New Low, Amidst Major Socio-Economic Crises

Disclaimer: The views expressed in this article are solely my own opinion and do not represent the opinions of the individuals or organization with which I am associated.

The Lebanese Lira (L.L.) or as I like to call it ‘Wara2 al 3areesh’ has hit a new significant and worrying low against the U.S. dollar, reaching 140,000 L.L. per US dollar. The currency has now lost more than 98% of its value since the start of its downward spiral in late 2019. The country has been grappling with major socio-economic crises that has led three quarters of its population into poverty amid soaring inflation.

The Beginning of the Lebanese Liras Downfall: How Anxiety Over Exchange Rates Turned into a Nightmare

At 6:22 PM UTC on October 28, 2019, an image began circulating on social media in Lebanon, depicting the beginning of the Lebanese Lira's depreciation against the US dollar. The image showed a sudden spike in the exchange rate on Google from 1,507 L.L. to 1,777 L.L. per 1 USD. This sudden change triggered panic among the public. As an example, here is a conversation between me and a friend discussing the exchange rate.

Initially, I believed that the exchange rate displayed on Google was inaccurate and only appearing due to the banks being closed, suggesting it was a black market rate. However, after further investigation, I realized that my assumption was completely erroneous. In fact, the exchange rate was legitimate and accurately reflected the current state of the Lebanese economy.

What Comes Next for the Lebanese Lira? A Look at its Uncertain Future

In Lebanon, instead of relying on conventional economic indicators to forecast the trajectory of our economy, we use the "reckless indicator" which is a gauge created by the people of Lebanon. It assesses the level of recklessness exhibited by our leaders, and the more reckless they are, the deeper we plunge into economic, political, and social instability. Unfortunately, over the past few years, Lebanon has been besieged by a multitude of crises, but instead of tackling them head-on, the political elite has chosen to exacerbate existing sectarian divides and do little else. Based on this assessment, it is clear that there is no actual limit to how far the Lebanese Lira will continue to fall. As time goes on, it will only become more challenging for the country to recover and rebuild from the ground up.

It remains unclear when will we see this, but I bet we will.

Possible IMF bailout

The political elite in Lebanon has been resisting the implementation of reforms requested by the international community. The International Monetary Fund (IMF) has characterized Lebanon’s situation as ‘very dangerous’ amid the stalemate of much needed reforms. The Lebanese government remain in talks with the IMF for a possible bailout amounting to USD 3 billion. A staff-level agreement was signed with the IMF around one year ago. However, Lebanon has not met the conditions to secure a full bailout program.

The IMF bailout is not enough to save Lebanon. However, it may be enough to restore the international community’s trust in the country’s leadership. It could also be a way to attract more investment into the country.

It is yet to be seen if the IMF board of directors and the Lebanese government will agree on a new consensus.

This article was written on March 27, 2023 via Substack.