Lebanese pound falls further, no end in sight to government deadlock

The pound was being sold under the counter for around LL8,350 and bought for around LL8,250

  
A customer wearing gloves holds Lebanese pounds at a currency exchange store, during a countrywide lockdown to combat the spread of coronavirus disease (COVID-19) in Beirut, Lebanon April 3, 2020.

A customer wearing gloves holds Lebanese pounds at a currency exchange store, during a countrywide lockdown to combat the spread of coronavirus disease (COVID-19) in Beirut, Lebanon April 3, 2020.

REUTERS/Mohamed Azakir

BEIRUT: Diminishing prospects that Lebanese politicians will quickly form a new “rescue government” saw the Lebanese pound fall further against the dollar Wednesday, trading at around LL8,300.

The pound was being sold under the counter for around LL8,350 and bought for around LL8,250.

The median black market price the previous day was LL8,250 – an 81 percent devaluation on the official rate of LL1,507.5, which is currently used to subsidize the import of wheat, fuel and medicines.

That official rate is looking increasingly like it will soon become a thing of the past, with the Central Bank said to be preparing to end subsidies on the import of these items toward the end of November or in December.

Lebanon is going through its worst ever financial crisis due to the reckless lending of the Central Bank to successive governments, which wasted the money by maintaining the pound’s peg against the dollar, running huge budget and trade deficits, and allowing corruption to thrive in the public sector.

Economists say that only an injection of fresh capital, most likely via an IMF bailout, can stabilize the economy and currency. That injection is not going to come absent a government that can push through reforms and restart bailout negotiations with the IMF.

Attempts to replace the government of outgoing Prime Minster Hassan Diab, who resigned over the Aug. 4 port explosion, have so far failed.

PM-designate Mustapha Adib stepped down last Saturday after he could not settle a dispute over the Finance Ministry.

Shiite parties the Amal Movement and Hezbollah are insisting that a candidate from their sect retain hold of the ministry and that they name all Shiite ministers in the new government.

Adib, backed by four former prime ministers and French President Emmanuel Macron, had been pushing for a government of 14 “independent specialists” and a rotation of the sectarian leadership of four sovereign ministries.

Hezbollah head Sayyed Hasan Nasrallah showed no sign of backing down his party's position Tuesday, saying in a televised speech that he would not tolerate these conditions, which he said amounted to “bullying.”

“We still welcome the French initiative and are ready to discuss with the French and all political forces,” Nasrallah said of Macron’s efforts to facilitate the quick formation of a rescue government. “However, the bullying that happened during the past month cannot continue, otherwise we will not reach a conclusion.”

Macron's initative ties donor aid to a new Cabinet being formed quickly and implementing a road map of time-bound reforms.

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