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Lebanon recorded the highest inflation rate in its history, surpassing 200% and ranking second in the world with high inflation to become a runner-up to Venezuela, and the ruling political class remains unconcerned about what is happening. nor does he have a serious rescue plan.
Former Finance Minister George Corm told the Al-Akhbar newspaper that the post-war reconstruction years did not include developing a strategy to protect or determining ways to support the population by successive governments, but rather setting the exchange rate. at 1515 pounds to the dollar. “This policy was adopted to achieve illegitimate gains at the expense of the people.” To justify the sin committed, “a beautiful profit” is made by the fact that the price fixing allowed part of the population to travel, buy new cars, go to fancy restaurants and learn in private institutions, but in practice it was a “service” provided by Governor of the Banque du Liban, Riad Salameh for the “1% category” and all those associated with it, including major depositors, politicians, merchants and bankers.
An economics professor at the London School of Economics says that exchange rate stabilization “has destroyed the national economy and its ability to move the labor market, produce capital and generate growth.” The real price “was double that of 1515, and the economy suffered a loss of two dollars for every dollar that left the country.” Whoever owns the money “was the biggest beneficiary, especially the one who kept his money in external accounts and did not use it again at home.” To this was added the high interest “to attract dollars and try to curb inflation, without worrying about creating job opportunities or supporting the real economy, so the value of wages weakened.” This path led to the imposition of phantom subsidies “on the consumption of the rich and poor classes, which came in the interest of the rich. The poor bought bread, medicine and gasoline on the basis of 1,515 lire, but this subsidy led to an inflated participation of the rich and their consumption without much cost, which increased their ability to save ”.
In 2019, the collapse came and the ability to stabilize the exchange rate evaporated, leading to the “threat” from Riad Salameh last August that it would stop at the end of 2020 from “subsidizing” imports according to the exchange rate. official. If the government finds a mechanism to replace the current “subsidy” formula, what is the justification for keeping the official dollar price at £ 1,515? Why does it not adjust in proportion to changes in financial indicators? An economist considers that “not adjusting the official exchange rate hurts the population, whose consumption has become mainly based on the black market price, without any improvement in their standard of living”, indicating that “it makes no sense to discuss the future of subsidies without studying the exchange rate and how to correct it ”. Salaries, depending on the determination of the socioeconomic policies to be adopted.
In the same context, Qurum believes that “the imbalance began with maintaining the exchange rate of 1515 pounds in exchange for multiple prices for different types of operations. This heresy increases chaos and manipulation in the market, and the commercial and financial interests of the country benefit from it. What Crimea does not find logical is that Lebanon “during the 1950s and 1960s was at the forefront by embracing a floating exchange rate and a strong economy, and then opting to stabilize the exchange rate as global economies moved towards liberalization of the currency. prices, which led to the looting of Lebanon and crippled its potential. ” Crimea does not speak of “unifying exchange rates”. But if the government wanted to do so, “it can set two prices, one for imports and the other for local trade.” However, what the former finance minister is proposing is “to return to the floating exchange rate within wide margins, which would allow Lebanon to adapt to global monetary developments and capture signs of any imbalance that may affect the market.”
The economic correction proposed by Corm and other specialists does not seem feasible with the beneficiaries of the situation. Finance Ministry sources say they are considering raising some fees on the basis of 3,900 pounds, but there is no official change in the exchange rate. Just as the option of “stabilization” was made in the 1990s in the interests of the “big guys”, it will continue to be applied today to protect the interests of the Banque du Liban and commercial banks. On paper, the official rate will remain at 1,515 pounds, “because changing it means declaring all banks bankrupt, because their capital is denominated in pounds,” says a banker.
Source: News
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