As economy worsens, Lebanese juggle dizzying rates for devalued pound

By Emilie Madi and Mohamed Azakir

BEIRUT (Reuters) – Caroline Sadaka has to keep her phone in hand while buying groceries in Beirut. Sadaka calculates the prices of goods using different exchange rates, which vary by store and sector.

The local pound has experienced an array of exchange rates as the Lebanese economy continues to collapse. This is complicating personal accounting and lowering hopes of reforming the economy as set out by the International Monetary Fund.

The government initially set the official exchange rate at 15,000 pounds to the U.S. dollar in February, which is nearly 90% less than the pegged rate of 1507.5.

However, the Central Bank is selling dollars at a rate of 79,000 to the greenback. Meanwhile, the finance minister intends to calculate tariffs for imported goods at 45,000 pounds. The parallel market rate is hovering around 107,000 pounds with daily changes.

Although supermarkets and fuel stations are required to post signs with the value they’ve adopted for the day, the rate is changing so quickly that many are pricing in the stable U.S dollar instead.

For example, examining a can of tuna, Sadaka illustrated the daily challenge faced by shoppers. She questioned whether the price of this can is logical, as it is in Lebanese pounds. Is this the price, an old price, or a new price in dollars?

Sadaka resigned from her job as a local currency schoolteacher when its value decreased by more than 98% against the dollar on the parallel market since 2019. The economy unraveled after decades of corruption and unsound financial policies.

For Lebanon to receive a $3 billion bailout from the International Monetary Fund, the government needs to implement one unified rate. This is among the pre-conditions set last year. However, politicians, protecting vested interests and avoiding accountability, have resisted the required reforms.

Meanwhile, the country is turning into a cash-based and dollarized economy due to rising inflation and banks’ restrictions on transactions.

Shop owner Mahmoud Chaar stated that the fluctuating exchange rate increases the uncertainty of his business, losing money overnight. Like many business owners, Chaar pays in U.S. dollars for the imported goods but sells in Lebanese pounds. He sold all his goods based on one rate on one day but woke up the next day to find the rate jumped almost 10,000 pounds per U.S. dollar. “Basically, we lost in the exchange rate difference what we had made in profit,” Chaar told Reuters.

Economist Samir Nasr said the diverse rates across sectors were making personal accounting messy for Lebanese citizens. He added that unifying the rates was more urgent than ever. “What is required is a full group of reforms and steps that will allow for the economic situation to stabilize in general – and would then allow the exchange rate to be unified,” he said.

(Reporting by: Emilie Madi and Mohamed Azakir; Writing by: Maya Gebeily; Editing by: Cynthia Osterman)

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