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Rana Searti wrote an article in the Al-Jumhuriya newspaper today entitled: “Al-Gomhoria: Will the exchange rate reach 6,200 or 14,500 pounds in 2021?” In which it was said:
Two scenarios for the direction of the exchange rate of the lira against the dollar in 2021 depend mainly on the assumption of forming a new government or not, implementing reforms and obtaining a rescue program from the International Monetary Fund. The positive scenario expects the exchange rate to unify at 6,200 pounds against the dollar, while the negative scenario suggests that the exchange rate will reach 14,500 pounds.
Practically and scientifically, the exchange rate of the local currency on the black market is affected by the process of supply and demand, but psychological factors are also an important factor in the direction of the exchange rate, especially with regard to developments in the political arena in terms of the possibility of reaching a consensus on the assignment of a president to form a new government and then Follow-up of external initiatives and authorship. After the exchange rate hit the threshold of £ 9,000 against the US dollar last week, it returned to £ 7,200 yesterday, amid news of Prime Minister Saad Hariri’s inevitability to form a government during parliamentary consultations in today. Consequently, there is a minimum ceiling for the lira exchange rate on the black market, which is defined through the supply and demand process, with a moving margin linked to psychological factors derived from political developments. What is the real exchange rate of the lira? What are the expectations about your direction in the next stage?
During the last few months, the exchange rate of the pound was significantly affected by political events. Following French President Emmanuel Macron’s intervention last August to help resolve the crisis, he visited Lebanon for the first time and then again on September 1. The second visit culminated in the announcement of an initiative that said that all the political forces had agreed and that it envisaged the formation of a government that would undertake reforms according to a specific program, in exchange for financial assistance from the international community. The exchange rate of the pound stabilized somewhat on the black market during that period between 7,000 and 7,500 pounds, but fell again after the failure of political forces to translate their promises.
With the apology of Ambassador Mustafa Adeeb, who was appointed to form the government, the lira fell again, recently reaching the 9,000-lira range. However, Hariri’s announcement that he is a candidate to head the government within the constants of the French initiative, in addition to the political environment that suggested his return, led to a rise in the exchange rate to 7,200 pounds against the dollar, which may forecast that the Hariri allocation, based on previous experiences, will again lead to exchange rate stability in the market. The black market is at its current levels, until the composition falters or succeeds, for the exchange rate trends to emerge in the fluctuating bullish or bearish phase.
In this context, the Institute of International Finance establishes two scenarios for the direction of the lira exchange rate in the current year and 2021. Scenario A is based on the assumption that a new government will not be formed, they will not be undertaken reforms and the absence of external financial support, while scenario B depends on the assumption of forming a new government before the end of the year. 2020, implementing the required reforms, and obtaining a rescue program from the International Monetary Fund to begin its implementation in early 2021 in parallel with the restructuring of public debt and the deduction of 60 percent of the value of Eurobonds.
In the first scenario, the Institute of International Finance expects that the official exchange rate of the pound against the dollar will remain at 1507 in 2021, and that it will be reduced to 8,000 liras for cash withdrawals in banks and exchange houses against 3,900 today, while the exchange rate will hit the black market if the government is not formed. And the failure to proceed with the reforms at about 14,500 pounds to the dollar.
Regarding the positive scenario B, the expectations refer to the reduction of the official exchange rate and the unification of the exchange rate of the local currency between the official rate, the bank rate and the black market rate, to reach 6,200 pounds against the dollar in 2021.
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