Lebanon devalues official exchange rate by 90%
Lebanon devalued its currency by 90% this week in an effort to fulfill promises made as part of a deal with the IMF to shore up its crumbling economy, the FT reports. But while the country’s central bank said it was aiming to unify its multiple exchange rates, the sharp devaluation to L£15,000 to the dollar left the official rate far higher than the roughly L£64,000 unofficial rate.
Lebanon is struggling with a long list of challenges, including runaway inflation, political instability, a financial sector facing steep losses and desperately in need of reform, exacerbated social tensions and energy shortages. Capital Economics, a London-based consultant, says the devaluation is a step in the right direction but it “barely scratches the surface of the problems that officials need to tackle.”
In a September 2022 report following a visit to Lebanon, the IMF’s Ernesto Rodrigo said much more reform and action would be needed before new funds could be unlocked. Highlighting the country’s dire economic straits, he added, “public sector institutions are failing and basic services to the population have been drastically cut. Despite the urgency for action [progress]remains very slow.”