Food prices soar, wages plunge in new Lebanon currency crisis

Food prices soar, wages plunge in new Lebanon currency crisis
Lebanon’s dollar supply has also been hit by a currency crisis in Syria. (AP)
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Updated 11 June 2020

Food prices soar, wages plunge in new Lebanon currency crisis

Food prices soar, wages plunge in new Lebanon currency crisis
  • Black market money changers send pound to record low of 5,200 to US dollar

BEIRUT: The Lebanese pound plunged to a new low against the US dollar on Wednesday as black market traders defied official attempts to support the currency.

The government and registered money-changers launched a pricing system last week with a gradually reduced rate announced each day with the aim of reaching 3,200 pounds to the dollar.

Under the scheme, money-changers set a buying price of 3,890 on Wednesday, with a selling price of 3,940. But dollars at this rate were unavailable and instead some sellers on the black market were charging up to 5,200 pounds to the dollar.

“We have given clear, decisive instructions to security agencies to be tougher in curbing the chaos in pricing,” Prime Minister Hassan Diab said.

Food prices are soaring and suppliers said it was increasingly difficult to find enough dollars to complete orders. “Looking forward only a few weeks ahead, we may not be able to honor our engagements toward our suppliers,” said Hani Bohsali, general manager of Bohsali Foods, a major food importer.

Lebanon’s money-changing syndicate chief Mahmoud Murad, who was briefly arrested last week accused of currency manipulation but released without charge, told Arab News: “What is happening is surprising and incomprehensible. We do not know the reason behind
this chaos.”

Lebanon’s dollar supply has also been hit by a currency crisis in Syria, where people are buying dollars to protect against inflation and hedge against the effect of impending US sanctions. 

Murad explained that Lebanon and Syria’s exchange rates were intertwined. “They are twins,” he said. “What affects the Lebanese pound affects the Syrian pound, and vice versa. The dollar exchange rate in Syria suddenly jumped to 3,500 pounds before unexpectedly dropping to between 2,600 and 2,700 pounds. We do not know why. Has someone poured US dollars into the Syrian market to cause this drop? Where did these dollars come from? It is strange.”

Murad called for a crackdown on black market money-changers. “We are committed to the syndicate’s daily exchange rate, but we want the black market to be combated the way street riots are being fought or we will close our shops,” he said.

The plunging pound has led to public protests as the value of Lebanon’s minimum monthly wage has dropped from $450 to about $100. “The system controlling the country is committing a major crime by allowing this chaos in the dollar exchange rate. The chaos in the prices of food is another crime,” the General Confederation of Lebanese Workers said.

Dozens of people protested in central Beirut on Wednesday, and activists blocked roads in Tripoli and Bekaa.