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Lebanon effectively devalues the pound

A quick update on crisis-hit Lebanon, which yesterday introduced a multiple-exchange-rate system. The move keeps the old dollar-pegged official rate at USD 1 / LBP 1506, but also launches a new rate, much devalued at USD 1 / LBP 2600, which is roughly equivalent to rates available on the black market and at licensed exchange bureaus.

The new rate will be reset weekly by the central bank and applies to withdrawals from all smaller bank accounts (up to a holdings value of USD 3000 or LBP 5 million). All such withdrawals will be in Lebanese pounds. This rate will also apply to all imports except ‘critical’ items (importers of essential goods will still be able to access hard currencies at the old official rate), so a further increase in inflation is likely (although complicated by the conflicting effects of the coronavirus pandemic).

The old rate will still apply to ‘bank transactions’, presumably including credit card settlements. The general public, including expatriate staff, of course, cannot make withdrawals in hard currencies for the time being, as they are suspended.

As always, we'll keep an eye on this situation and update further as necessary in our monthly currency review at the end of April.

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