Lebanon devalues ​​the official exchange rate by 90 percent Business news

The central bank confirmed a new official exchange rate of £15,000 to the dollar, up from just over £1,500.

Lebanon devalued its official exchange rate for the first time in 25 years, weakening it by 90 percent but still leaving the local currency well below its market value.

The central bank confirmed a new official exchange rate of £15,000 to the US dollar on Wednesday, ending the just over £1,500 rate at which the currency was pegged for decades before the currency’s collapse.

The pound has fallen in recent years, with many Lebanese pointing to mismanagement by the country’s ruling elite and decades of corruption that led to the 2019 financial meltdown.

Lebanese officials described the adoption of the new official exchange rate as a step toward unifying a range of exchange rates that emerged during the crisis.

But market participants said the pound was changing hands at about 60,000 to the dollar on Wednesday on the parallel market, where most trading takes place.

Since the economic crisis, cash-strapped Lebanese banks have imposed informal restrictions on dollar cash withdrawals, with most depositors losing access to their savings.

The new rate will apply to limited local currency withdrawals from US dollar accounts. It should also apply to customs duties in a country that is heavily dependent on imports.

Withdrawals in Lebanese pounds from hard currency accounts at the new official rate will continue to suffer a de facto haircut of 75 percent based on Wednesday’s market rate.

The unification of multiple currencies is one of several steps the International Monetary Fund has sought for Lebanon to receive a $3 billion aid package to help it emerge from the crash.

But the IMF said last year that progress on reforms remained “very slow” and most had yet to be implemented despite the severity of the crisis that has marked Lebanon’s most destabilizing phase since the 1975-90 civil war.

That peg to the dollar was introduced in 1997 to boost investor confidence and stem hyperinflation after a 15-year conflict.

Lebanon’s central bank and the Ministry of Finance first announced the decision to officially devalue the pound last September.

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