lebanese Pound Holds Steady Against the Dollar Amidst Economic Uncertainty
Despite ongoing economic turmoil, the Lebanese pound demonstrated surprising resilience against the US dollar on Thursday, December 26, 2024. While the Lebanese economy continues to grapple with significant challenges, the currency markets showed a degree of stability, offering a momentary reprieve from the volatility that has characterized recent years.
at the Central Bank of Lebanon, the official exchange rate remained relatively stable, hovering around 15,000 Lebanese pounds to the US dollar.However, the parallel market, often a more accurate reflection of the true value, saw the dollar trading at approximately 89,600 Lebanese pounds for purchase adn 89,700 pounds for sale. This consistency across different exchange platforms suggests a degree of market equilibrium, at least for the day.
This stability comes as a welcome surprise, considering the broader economic context. The World Bank recently reported a decline in Lebanon’s real GDP growth of approximately 6.6 percent in 2024, citing geopolitical tensions as a major contributing factor. The cumulative decline in GDP as 2019 has exceeded 38 percent, highlighting the severity of the ongoing economic crisis.
Adding a layer of complexity to the situation is the phenomenon of “dollarization,” were the US dollar has become the de facto currency for many transactions in Lebanon. This practice emerged after the 2019 economic crisis and subsequent protests, leading to a significant decoupling of the lebanese lira from the dollar in both the parallel market and, to a lesser extent, in local banks.
Despite the challenges, there’s a glimmer of hope. The Bank of Lebanon’s liquid reserves in foreign currencies increased to $10.176 billion mid-december, marking a rise after a period of decline. This increase, while modest, could signal a potential turning point in the country’s economic recovery.
The situation in Lebanon remains precarious, and the long-term outlook for the Lebanese pound remains uncertain. However,the unexpected stability observed on December 26th offers a brief moment of respite and a potential indication of underlying market forces at play. Further observation is needed to determine whether this stability is a temporary phenomenon or a sign of more lasting economic recovery.
Lebanese Pound Holds Steady Despite Economic uncertainty: An Interview with World Today News Senior Editor
World Today News (WTN): The Lebanese pound unexpectedly held steady against the US dollar on December 26th, 2024, despite ongoing economic turmoil in the country. What are your thoughts on this surprising development?
Senior Editor: It’s certainly a welcome surprise. The Lebanese economy has been grappling with severe challenges for years, and the currency has been especially volatile. While it’s just a single day’s reprieve, the relative stability observed on December 26th is a glimmer of hope. [ [1] ]
WTN: Can you elaborate on the economic context surrounding this situation?
Senior Editor: The World Bank recently reported a steep decline in Lebanon’s real GDP growth for 2024, partly due to geopolitical tensions. The cumulative economic contraction since 2019 exceeds 38%.This highlights the depth of the crisis. [ [1] ]in This context, any sign of stability, even temporary, is noteworthy.
WTN: The article mentions “dollarization” as a factor influencing the Lebanese economy. Can you explain what this means
and its potential impact?
Senior Editor: “Dollarization” refers to a situation where the US dollar becomes the primary currency for transactions, replacing or supplementing the local currency. This trend emerged in Lebanon after the 2019 economic crisis due to a loss of confidence in the Lebanese pound. [ [1] ]It leads to a decoupling of the lebanese lira from the dollar, particularly in the parallel market.
WTN: What could explain the unexpected stability of the Lebanese pound on December 26th?
Senior Editor: It’s difficult to pinpoint a single cause. It could be a combination of factors, including the rise in the Bank of Lebanon’s liquid foreign currency reserves, which increased to $10.176 billion in mid-December. [ [1] ]This increase, even though modest, could signal a potential turning point in the country’s economic recovery.
WTN:
What is the long-term outlook for the Lebanese pound and the country’s economy?
Senior Editor: ** The situation remains precarious. While the stability on December 26th is encouraging, it’s too early to say if it’s a lasting trend.Further observation is needed to determine the underlying market forces at play and whether this stability will be sustained. However, it is a hopeful sign amidst challenging circumstances.
