Hottest commodity in Lebanon’s economic chaos: The US dollar

A cell phone shop owner wears gloves as he counts US dollars, in Beirut, Lebanon. (File/AP)
Short Url
Updated 17 July 2020

Hottest commodity in Lebanon’s economic chaos: The US dollar

  • The financial meltdown has thrown Lebanese into a frantic search for dollars as their local currency’s value evaporates

BEIRUT: The lines snaked around the block. Then they swelled to fill the whole street, before they turned into a raucous mob of men shoving to the front of the line. There at the exchange bureau, they could buy rationed dollars, the hottest commodity in Lebanon.
The small Mediterranean country’s financial meltdown has thrown Lebanese into a frantic search for dollars as their local currency’s value evaporates. To get the precious hard currency, they must navigate labyrinthine regulations, exploiting any loopholes they can to rescue their earnings.
Every transaction, from doctor fees to store purchases to rent, is negotiated day by day, juggling the tumbling Lebanese pound and multiple, changing dollar exchange rates. Those who can are snapping up luxury goods or real estate, trying to use their dollars trapped in bank accounts frozen by the cash-strapped authorities.
The turmoil is deepening resentment of the political elite and the once flourishing banking system — and fueling desperation.
“They are going to crash us into a wall,” Chris Georgian, a 25-year-old student, said, trying to buy $600 at an exchange bureau to send for his university fees in Armenia.
Last week, a 61-year-old man apparently distraught over his economic situation shot and killed himself on a Beirut commercial street, one of multiple suicides during the crisis.
Despite survival skills honed by political tension and wars, nothing prepared Lebanese for having to line up to buy money.
During the 15-year civil war and Israel’s invasion and occupation of the south and Beirut, there may have been queues for water or bread, but Lebanon was always flush with dollars.
Since 1997, the local currency, the pound, was pegged at around 1,500 to the dollar, and Lebanese used the two interchangeably.
That stability was built on what experts say was essentially a Ponzi scheme that let banks and the elite profit while allowing Lebanese to live beyond their means.
Successive governments borrowed from private banks to finance massive public debt and pay for vital imports like fuel — but also luxury goods — eating into depositors’ dollar accounts. Most of those deposits were from Lebanese expats attracted by high interest rates.
It collapsed when remittances and direct foreign investments plunged in recent years.
In the ensuing liquidity crunch, the pound has lost nearly 85% of its value. Tens of thousands have fallen into poverty, wages are worth only a fraction of what they once were, and prices are skyrocketing — stripping Lebanon of its trademark joie de vivre and vibrancy.
Chain retailers have shut down, unable to import or price goods with the fluctuating rates. Some vendors have either closed or only take payment in dollars.
Dollar accounts have been frozen, and those trapped dollars have become “Monopoly money” with no value outside Lebanon, said Dan Azzi, a former banker and analyst. He coined a name for that currency, the “Lollar” or Lebanese dollar.
People began hoarding cash dollars, getting relatives living abroad to transfer dollars, which — unlike frozen local accounts — can be withdrawn from the bank.
Some sell gold for dollars. “We buy gold at the highest price $39-$55 and in cash,” reads one jeweler’s marketing telephone message.
The peg remains in place officially, even as the black market price of a dollar has spiraled to at least five times that. Meanwhile, authorities imposed rationing on exchange bureaus, limiting how many dollars a person can buy and setting a rate higher than the peg but lower than the black market.
That fanned the raucous lines. Some bought dollars only to sell them on the black market. New phone apps cropped up to keep track of multiple rates.
“Isn’t all this humiliating?” said Elie, a security guard keeping order at an exchange bureau. “When senior officials were making money, we were getting some of it. Now they aren’t anymore, so they deny it to us,” he said, declining to give his last name because of his job.
Many scramble for ways to use their trapped “Lollars,” fearing they could eventually lose them completely.
Lines formed outside luxury retailer Louis Vuitton because it was selling at a rate half the black market. Others use stuck dollars to settle bank loans, still valued at the official peg. Azzi estimates loans up to $15 billion have been paid already.
Ghassan Frem, a dentist, paid a friend’s loan of over $30,000 with his “Lollars.” She paid him the money in an account abroad. It is a win-win: He uses his “dead” dollars, and the friend settles her loan at a discount.
Meanwhile, Frem bought $950-worth of new air conditioners on his credit card. The trick is: He pays his credit card bill at the official rate with pounds he bought on the black market for far fewer dollars.
Many use this loophole, buying merchandise or doing renovations whether they need it or not, to rescue trapped dollars.
“Anyone who can get back at the banks is doing some good,” Frem said. “We do to them what they have done to us.”
On social media, some proposed organizing a peer-to-peer platform to avoid using banks.
Meanwhile, real estate transactions jumped more than 16% in the first quarter of 2020, according to the General Directorate of Land Registry. One of Lebanon’s largest real estate companies, Solidere, reported a profit for the first time since 2018.
For his dentist clinic, Frem negotiates purchasing supplies item by item, hour by hour. One Monday afternoon, he ordered a product and by the time it arrived the next day, the dollar price had gone up 20%. “The delivery guy got a text message with the new price when he arrived,” Frem said.
For Georgian, the student, his education is on the line.
A third-year psychology student in a Yerevan university, he returned to Lebanon because of coronavirus. With his parents’ dollars locked up, he has to chase dollars to finance his return.
At the exchange office, he asked the guard to walk him through the documents he needed. Under new rules to curb profiteering, you must prove you need rationed dollars to pay education fees, rent, medical fees or salaries for foreign workers. No one gets cash — the dollars you buy are sent directly to the destination.
Still, Georgian was relieved. His school fees are $600, and the cost for that at the exchange is about half what it would be on the black market, saving him enough to live for months in Yerevan.
“If the dollar keeps rising, I will never go back,” he said. “I will lose my education.”
Georgian questioned his parents’ decision to remain in Lebanon despite constant complaints of corruption.
“They said they didn’t think it will be this bad,” he said, shaking his head.


Debate rages over Turkey’s surging pandemic numbers

Pedestrians, wearing face masks, walk in a street of Ankara on November 20, 2020. (AFP)
Updated 46 min 45 sec ago

Debate rages over Turkey’s surging pandemic numbers

  • 20% of Israeli travelers to Turkey in October tested positive for coronavirus on their return
  • No PCR test is required now in Turkish airports for the passengers entering the country. It is a very big mistake

ANKARA: Unofficial sources have warned that numbers of COVID-19 cases in Turkey are skyrocketing.

The Turkish Medical Association (TTB) estimated that daily COVID-19 cases have risen to more than 47,500, of which about 12,500 are in Istanbul. This would represent a 300 percent increase in November compared to the month before.

According to official data, however, Turkey recorded 5,103 new COVID-19 patients on Nov. 20 — the second highest new daily figure since March — and its highest daily death toll with 141 fatalities.

Istanbul Mayor Ekrem Imamoglu announced that 186 people died from “infectious diseases” in the city on Nov. 22 — more than the official countrywide death toll. (The Turkish health ministry is accused of classifying some COVID-related deaths as "infection-related deaths")

The TTB, whose data drew on figures from 1,270 medics in 76 provinces, claimed that someone in Turkey dies from COVID-19 every 10 minutes. It declared that “they have lost control of the pandemic.”

Health Minister Fahrettin Koca previously admitted that they do not include everyone who tested positive for COVID-19 in the number of daily cases — they only count those who show symptoms. Following this admission Turkey was put on the UK’s quarantine-on-arrival list in early October.

BACKGROUND

Health Minister Fahrettin Koca previously admitted that they do not include everyone who tested positive for COVID-19 in the number of daily cases — they only count those who show symptoms.

Reports drawing on Israeli health ministry data say that 20 percent of Israeli travelers to Turkey in October tested positive for coronavirus on their return home, which experts consider a worryingly high figure.

Everyone arriving in Israel is obliged to self-isolate for 14 days. There is no such an obligation in Turkey.

“The countries which prove successful in managing the pandemic are those that apply strict quarantine rules and rigorously regulate arrivals in the country. But this is not the case in Turkey nowadays,” said Guner Sonmez, a radiologist from Uskudar University in Istanbul.

“Only one case can again trigger a whole chain of contagion and begin a new wave of pandemic. However, no PCR test is required now in Turkish airports for the passengers who enter the country. It is a very big mistake for managing the dynamics of the pandemic.”

Turkey recently re-introduced a partial evening curfew and restrictions on the weekends, although scientists have been urging a full 14-day lockdown.