BEIRUT: Holders of large stacks of U.S. dollar banknotes feel like they are the king of the hill in Lebanon. This exceptional feeling is understandable under the existing situation in the country which has seen 87 days of anti-government protests, the resignation of the former Prime Minister Saad Hariri, near paralysis of most public and private institutions and mass outflows of deposits.
All these factors triggered a mad rush for the dollar that exceeded the LL2,300 threshold Wednesday among most exchange dealers who claim that they are not responsible for the surge of the foreign currency.
“Don’t blame the exchange dealers for the collapse of the lira. Ask the banks when they are not giving their customers dollar banknotes.
The run on the dollar is mainly due to the big and unprecedented demand for this currency,” Michael Baida, the former head of the exchange dealers association in Lebanon, told The Daily Star.
Commercial banks still maintain the price of the dollar around LL1,507 but they refuse to disburse large amounts of dollar banknotes to their customers under the pretext that there is an acute shortage of these bills.
Bankers argue that the crisis started when depositors withdrew over $3 billion in banknotes before the outbreak of the anti-government protests and another $2 billion in the past three months.
But most of this cash was hoarded in the houses and offices of citizens who apparently felt that banks may come under threat after international rating agencies downgraded the lenders due to their growing exposure of the country’s public debt.
“The dollar has become a scarce item in Lebanon. The demand for this currency far exceeds the supply. We are buying the dollar banknotes from citizens and companies who hoarded this foreign currency before the crisis. We are not importing dollars. Ask the banks why they refuse to allow depositors to withdraw dollars?” Baida said.
Many if not all banks have applied unofficial capital control allowing depositors to withdraw no more than $200 to $300 a week.
A chairman of a large bank insisted that all the dollar deposits were safe and there was no need to panic.
“We are not responsible for this situation. We don’t print dollars.
But we could not cater to the demands of all our customers. We have not experienced this situation for a very long time,” the banker told The Daily Star.
Basically, a big chunk of the banks’ dollar deposits are kept at the Central Bank and the rest are invested abroad.
The Central Bank’s foreign currency reserves, excluding Eurobond holdings, shrunk by $3.9 billion from end of August to end of December 2019 to reach $31.6 billion.
BDL holds $5.7 billion worth of Eurobonds in its portfolio and, adding these dollar-denominated bonds, its foreign assets are $37.3 billion at the end of 2019, a decline of 0.9 percent compared to the same period of 2018.