Will the governor of the Banque du Liban, Riad Salameh, continue to sell the dollar, according to an exchange platform, at a price of 38,000 pounds per dollar, after the volume of his interventions exceeded over a billion dollars in recent days? , all the more so as the dollar is rallying in the parallel market after going from £48,000 to £42,000? Or keep draining Lebanese currency to prevent inflation after losing a large amount of national currency, knowing that it remains the main player in the parallel market through its circulars and procedures, then buy and sell according to its needs, conditions and coordination with the political authority, and therefore is the ruler and controller of the foreign exchange market?
Has the Banque du Liban realized that it is now unable to control the exchange rate and the decline of the dollar while it is working on a new dynamic represented by monetary stability, even at a high dollar price?
Banking risk expert Dr. Muhammad Fahili believes that the foreign currency stocks held by the Banque du Liban should be used to consolidate the country’s monetary stability, be it $500 million or $1 billion. The intervention of the Banque du Liban is to reduce the dollar in the absence of reforms and signs of solutions. The politics and the continuation of the economic turmoil, which confirm that any decline in the dollar carried out by the Banque du Liban will be circumstantial and the long path of the dollar is an increase, not a decrease.
Fhaili believed that the goal of the Banque du Liban is to ensure some kind of monetary stability, even if the price of the dollar is high, because this entails the stability of the prices of basic consumer goods and the prevention of price chaos , as well as creating a sort of trust, even a simple one, on the part of the Lebanese citizen in the Lebanese currency, and I imagine that the Banque du Liban managed in the year 2022 to guarantee this monetary stability on the three axes I mentioned.
Fahili said that in December of the year 2021, when Circular 161 was issued, it laid the foundations for a new dynamic in terms of money supply management, monetary stability and exchange rate, and therefore, the Bank of Lebanon is the decision-maker in whichever direction the dollar takes, up or down, and being able to control the rise of the dollar by controlling the trading platform, which, with the sharpness of a pen, raised the price of the dollar from 31 to 38 thousand pounds to withdraw quantities of Lebanese currency because it knows the value of wages and salaries will be greater and does not want inflationary shifts, just as banks have benefited from the Bank of Lebanon’s recent action due to the large fees it charges following the conversion from Lebanese pound to the dollar. Fahili admitted that the Banque du Liban is able to circulate the money supply in dollars and sell it, then buy and sell it on an exchange platform and buy it in the parallel market through some large exchange offices to cash in the dollar at a certain exchange rate to secure wages, salaries and electricity.
Fhaili pointed out that the Banque du Liban is the largest player in the parallel market, and is the decision maker in the exchange platform, which is the only tool available in the hands of authority and a lifeline for financing operating expenses, and is most influential in the economy for managing the dollar exchange rate and reducing inflationary pressures. The platform, until now, is dedicated to the offer (sale) of dollars at a price supported by the Banque du Liban and is not a free circulation platform (demand and supply of dollars).
And that money printing contributes to the production of inflationary pressures if all are employed in turning the economic wheel, and for this reason the quantity stored should not be counted as part of the money supply when studying and evaluating the inflationary effects of printing money . For this reason, the Banque du Liban is forced, from time to time, to resort to targeting banknotes held in sterling when it lifts controls on the demand for dollars through an exchange platform (for unlimited sterling banknote holders), and stored in new dollars producing an attractive exchange rate for the dollar in the market. For this reason an exchange platform must be maintained and used solely for the disbursement of wages and salaries, because opening it without limit to note holders encourages hoarding, speculation and exchange perturbation rather than exchange fluctuations which are between expectations.
It secures dollars through compulsory investments, which were previously 15% against foreign deposits, in addition to the dollars it obtains through its involvement in the foreign exchange market and a quantity of dollars with special drawing rights and others.
