The official exchange rate at
LL15,000 from next February
BDL expects economic growth this year
Starting next February, the official exchange rate will be devalued from LL1,507 to LL15,000 to the US dollar, according to Riad Salameh, Governor of the Central Bank (BDL).
Dollars withdrawn by depositors from their bank accounts will be paid in lira at the new official exchange rate. Prior to this change, the applied rates were LL12,000 for funds subject to BDL Circular 158 and LL8,000 for those governed by Circular 151.
These and other similar circulars are likely to be canceled once Parliament approves a capital control law. Salameh said that the upcoming law will govern the relationships between depositors and banks.
The governor said this is an additional step towards unifying the exchange rates. It started with the customs exchange rate set by the Ministry of Finance (MoF). MoF has decided to apply the LL15,000 rate for evaluating taxes and duties imposed by the Customs authorities on imports starting from December 2022. At first, there will be two official exchange rates the LL15,000 and the Sayrafa rate. At some future point, the Sayrafa rate will be determining the official exchange rate, according to Salameh. The exchange rate will be floated and will depend on the forces of supply and demand but BDL will intervene when needed to keep the fluctuations within standard margins. BDL can control the lira money supply without losing large amounts of its dollar reserves. “We are able to suck all the lira supply by injecting $1 billion in the market,” he said.
Salameh said that it is not BDL’s responsibility to pay for public sector salaries and their adjustments. The government should pay them. According to Salameh, printing more liras will create inflation that will overshadow salary adjustments. “The government must generate revenues to finance the new increase in salaries,” he said. As a result of higher salaries being paid, BDL will be injecting $340 million into the market in the coming three months but this will not weaken its financial position, according to the governor. The exchange rate of the lira ought to improve or stabilize because large amounts of dollars will be injected into the market.
BDL’s foreign assets that could be used abroad amount to $10.3 billion, gold reserves excluded. The Central Bank’s total assets, which currently stand at $15.2 billion, decreased by just $2.5 billion since the beginning of 2022, Salameh said. This is despite the fact that BDL has provided financing to the public and private sectors and suffered the decline of the euro because it has assets denominated in euro, he said.
BDL will not use its reserves to finance fuel imports for electricity generation as these imports will be funded through collecting electricity fees at the new tariff, according to Salameh. He said that the government would be able to collect in lira the equivalent of $300 million in the coming six months which will be converted to dollars at the Sayrafa rate.
BDL expects Lebanon to achieve economic growth of about two percent in 2022, Salameh said.
Published by Lebanese Opportunities on November 23, 2022.
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