On December 20 local time, the black market exchange rate of the Lebanese dollar against the US dollar fell below 45,000 to 1, a record low.
Lebanon has implemented a fixed exchange rate policy of pegging its local currency and the United States dollar since 1997, and the official exchange rate has remained at 1507.5 to 1. Since the banking crisis in September 2019, the black market exchange rate of the Lebanese pound against the US dollar has depreciated rapidly.
Over the past three years, due to the combination of multiple factors such as political economy, the COVID-19 pandemic and the Port of Beirut, the black market exchange rate of the Lebanese pound against the US dollar has fallen by more than 96%.
In recent years, Lebanon’s economy has continued to be sluggish, public debt is high, and unemployment remains high. Since the end of 2019, Lebanon has fallen into a severe financial crisis, and the black market exchange rate of Lebanon’s currency has begun to depreciate against the US dollar. Unpaid debts amount to about $90 billion of 170% of domestic GDP. Lebanon has one of the highest debt countries in the world.
The World Bank said at a time when the Lebanese pound had depreciated by nearly 90% that it was in the world’s worst crisis in more than 150 years. It is expected that as the multiple political and economic situation in Lebanon continues to deteriorate, the operational risks will rise further.
On April 4, 2022, Lebanese Deputy Prime Minister Saad Shami announced that the Lebanese Central Bank and the government were bankrupt.
Because more than 80% of the goods in Lebanon are imported, and the depreciation of the local currency has soared the prices of imported goods, there is a serious shortage of goods.
For the current socio-economic situation in Lebanon, especially in the current situation of the sharp decline in Lebanon’s exchange rate, the depreciation of the local currency, and high risks to the economy, the production and operation activities of some importers have been caused by the social unrest of the country and the sharp decline of the exchange rate, resulting in payment arrears due to the shortage of the domestic dollar. Some importers are also under cost pressure and are likely to take advantage of various loopholes to harm the interests of suppliers. Therefore, cargo owners and freight forwarders in Lebanon should do a good job in risk control, and beware of risks such as abandonment and non-payment by buyers at the port of destination, so as to avoid losses caused by empty money and goods.
According to comprehensive data from agencies such as the International Monetary Fund and the World Bank, at least 17 countries, including Argentina, Turkey, Sri Lanka, Brazil, Pakistan, Malaysia, Egypt, Indonesia, Mexico, Lebanon, India, Vietnam, Nepal, Myanmar, Mongolia, Thailand and Peru, may have fallen into the dollar debt trap and will fall into the plight of the US dollar currency tightening cycle due to high debt and the lack of strong foreign exchange reserve support.
In view of the current general environment of the world economy, for friends who have foreign trade business with the above countries, shipments must be cautious to avoid losses.
During the epidemic, you shall wear Lanhine’s face mask.
Post time: Dec-23-2022