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Nothing in Lebanon, however large, has gained the attention of all Lebanese, as is the case with the US dollar. The latter, since our financial catastrophe a year ago, has been at the top of our list of concerns, not because we are millionaires, and half of us, if not more, have converted among the poor, but because the performance of the green coin controls the joints of our lives, our livelihood, our food and our drink, even our medicines are almost lacking. This trajectory of the dollar, like Chirina and its fluctuations, fluctuates up and down, not in a few days, but in a few hours, and generates devastating calamities.
Behind the fluctuations of the exchange rate on the black market are not only economic data and the rules of supply and demand. Rather, the political equation stands out by imposing its rhythm on the exchange rate on its black market, so that the price rises as the pace of political tensions increases, and our rulers are creative with dose of tension, and decreases with any political advance.
A look at the exchange rate shows how it fluctuates according to political developments. Following the French initiative and the assignment of Ambassador Mustafa Adib to form the government, the exchange rate fell and during that period stabilized at a high of 7,000. And in the face of the failure of the initiative and Adib’s apology, the dollar again shot up to the 9,000-pound range. On the eve of the assignment of Prime Minister Saad Hariri, and as a result of the expectations of a growing speech by the President of the Republic, General Michel Aoun, the exchange rate rose to the threshold of 7,700 Syrian pounds and, as a result of the lack of a further postponement of the consultations in Aoun’s speech, dropped to almost 7,400 pounds in two hours. Moments after Hariri’s transfer, the price dropped between £ 7,050 and £ 7,150, then came back and dropped two hundred pounds.
Many questions posed by the confused citizen, will the dollar continue on the path of rationalization and gradually decline? Or will it fly again? And if Hariri could form a government of independent specialists as he promises, to what level would the dollar fall? What effect does the political path have on price fluctuations? What about economic rules and their role in determining long-term price?
In a reading of the trajectory of the dollar and the factors that control it, Dr. Elie El-Khoury, an economics researcher and editor of an economic website (bankfiles.com), points out the interaction of the dollar exchange rate with any positive news on the political side, so it falls to certain limits, as happened shortly after Hariri’s assignment. And accepted by the result of the French initiative. However, naming Hariri alone will not cause the dollar to depreciate, but the margin of interaction and decline depends on the speed of composition and the confidence of parliament, so the faster the composition, the lower the exchange rate. It also depends on the post-formation stage and the government’s performance, in terms of the identity of the ministers, if they are really technocrats, especially given the experience of the Diab government, which included non-partisan ministers, but followed political agendas , so the government failed.
The dollar will not fall more than 5,500 in the best of cases
According to Al-Khoury’s vision in an exclusive interview with “Lebanon 24”, regardless of the positive political data, the dollar will not fall below the ceiling of 6,000 or 5,500 pounds at best, which means that if Hariri could compose and begin the negotiation path with the IMF, the fall of the dollar would not cross the threshold. 5500, which will be fixed at this price.In addition to politics, there are factors that control the exchange rate, such as the money supply in the lira, the huge inflation with the printing of 24 trillion pounds, the sovereign risks of the state and public debt, especially given the stoppage of Eurobond payments since last March, all of which are negative indicators, not to mention. On the anomalous and confusing practices of the banks and the Banque du Liban, such as the latest circular No. 573.
The dollar has great power in Lebanon, somewhat similar to the power of the ruling class. The performance of the latter has always been reflected in the change of the dollar, so why is the exchange rate affected by the political factor in Lebanon?
Al-Khoury responds: “It is true that the basis of supply and demand controls the dollar in world markets, but also the dollar is linked to politics outside Lebanon. In the United States of America, the dollar rises and falls. after the impact of the US presidential battle, and also due to the tug of war in the economic battle between China and the US A speech by the US president or his Chinese counterpart causes fluctuations in the dollar exchange rate. Also, in the European theater, Britain’s exit from the European Union or Brexit was reflected in the price of the euro, which in turn affected the price of the dollar.
Al-Khoury added: “But the dollar in global markets is left to the game of the market and the equation of supply and demand, even if it is identified with political discourse. As for Lebanon, the matter is different, especially to the light of the fixing of the dollar exchange rate, so it is no longer subject to the processes of supply and demand, and the Central Bank must intervene in The market has been controlling its rhythm and slowing its rise. it has cost the treasury a lot of hard currency money As a result of this equation, the political climate has come to control the exchange rate, not the supply and demand process.
By failing to build a productive economy, the Lebanese pound lost the confidence of the Lebanese
The relationship of the Lebanese citizen with the dollar, and his abandonment of the pound in any financial and economic situation, as a consequence of his lack of confidence and security towards his national currency. How not? The experience of 1993 is still fresh in the mind, when people lost their money due to the high exchange rate up to the limit of 3000 pounds. From here, El-Khoury points out, “a citizen has taken a“ leap ”to the fluctuations of the dollar, and because the Lebanese lost confidence in the ruling political class, turning to currency as an escape valve to preserve value of your money. In addition, our economy is dollarized in terms of the trade balance and the balance of payments, due to the lack of construction of a productive and focused economy. On the rentier economy, and the result is that we import 80% of our needs, and of course we pay in dollars to import them ”.
So the dollar will continue to be the strongest ruler in light of our rentier economy, given our need for it to source all commodities, including those related to food and pharmaceutical security. The best solution, according to Khoury, is to remove the authority to print the currency from the Bank of Lebanon and entrust the task to the Currency Board or the Currency Board, which undertakes the process of printing the pound according to the following principle: All process of printing the local currency must enter its equivalent in dollars, which would reduce inflation. This is what has been adopted in countries like Argentina and Hong Kong.
