BEIRUT: Rumors about the Lebanese pound’s exchange rate reaching LL7,000 to the dollar are suspicious and designed to spur unrest, President Michel Aoun indicated Friday following nationwide protests against the pound’s catastrophic depreciation.
“What happened yesterday as a result of the rise in dollar price without justification makes us wonder whether the figure that was given for the dollar [exchange rate] is a rumor that was circulated to bring people to the streets and clash. Is it a political, banking or some other type of game?” Aoun said at a Cabinet session Friday in Baabda Palace.
The Lebanese pound fell to an all-time low of around LL5,000 to the dollar Thursday, decimating what is left of the Lebanese people’s purchasing power. Rumors circulated that it had sunk as low as LL7,000 to the dollar.
“Financial experts confirmed that it was not possible for the dollar or any other currency to jump in a matter of hours to that level,” Aoun said. “It suggests a planned scheme that we must come together to fight.”
Prime Minister Hassan Diab added during the meeting that “harsh measures” were needed to prevent “additional setbacks,” and that the authorities must take “practical measures to give greater immunity to the government and state.”
Cabinet agreed Friday to take stronger legal action against those responsible for shaking public confidence in the Lebanese pound.
Justice Minister Marie Claude Najm was tasked to work with the public prosecutor on identifying and opening legal cases against the source of the rumors.
Finance Minister Ghazi Wazni was put in charge of a to-be-created “crisis cell” that will meet twice weekly to discuss the latest financial and monetary developments. Central Bank gov. Riad Salameh will be part of this cell and will periodically submit “detailed reports” on BDL’s activities and state of financial affairs directly to Diab.
Security agencies will meanwhile be tasked to “strictly suppress violations” relating to exchange rate manipulation. They will have the power to seize sums of foreign currencies used by illicit traders.
Aoun and Diab met with Parliament Speaker Nabih Berri before Friday’s Cabinet session to discuss measures to stop the pound’s depreciation.
Berri restated after the meeting the intention of Lebanon’s ruling political and financial elite to bring the exchange rate to LL3,200 to the dollar.
The head of the Syndicate of Money Changers in Lebanon said earlier Friday that an agreement had been reached with Salameh for the latter to inject dollars into the local currency exchange market.
Aoun confirmed during Friday's Cabinet meeting at Baabda Palace that Banque du Liban would start pumping dollars to licensed currency exchangers from Monday. The fall in the dollar price would be seen “gradually,” Aoun said.
The pound’s volatility stems from an acute dollar shortage in the local economy and a financial meltdown following the Central Bank’s loss of $83.2 billion. The government has also been forced to default on part of its Eurobond debt and restructure the remaining $90 billion it owes to creditors, including many local banks.
Aoun said Friday that the losses should be distributed between the government, BDL and commercial banks – not depositors, whose savings are mostly inaccessible because of informal controls imposed by Lebanese banks to limit withdrawals and foreign transfers.