Dr. Patrick Mardini, President of the Lebanese Institute for Market Studies, confirmed that establishing a Monetary Council in Lebanon is the solution to stabilize the rise of the dollar or even reduce it within 30 days.
Mardini clarified in an event with the Russian Sputnik agency today that the rise of the dollar has no ceiling as long as the factors for its increase remain. He indicated that the implementation of a Monetary Council in Lebanon could halt the rise within 30 days and restore confidence in the Lebanese pound; however, as long as the government does not establish the Monetary Council, the exchange rate will continue to rise and living conditions will deteriorate.
Mardini noted that "the dollar has been on an upward trend for over a year, and there are three reasons pushing the dollar to rise. The first reason is the excessive printing of the Lebanese pound to finance public expenditures, meaning that today the Lebanese state’s expenses are much higher than its revenues. Therefore, to fund the difference, it resorts to printing the Lebanese pound, which increases the volume of the money supply in Lebanese pounds. The second reason is the small size of the economy, and the third element is the lack of trust in the local currency. These reasons drive the dollar up and will continue to do so in the foreseeable future."
He considered that the circular issued by the Banque du Liban, which requested an increase in banks' capital, accelerated the pace of the dollar’s rise against the Lebanese pound in recent days. Mardini explained to Sputnik, "This circular included a request for banks to increase their deposits at correspondent banks in fresh dollars. Some banks resorted to the local Lebanese market to buy their dollars from the black market to comply with the circular. This pressure on the black market, due to the increased demand for dollars by the banks, led to a rapid increase. However, the dollar would have risen in any case."
He pointed out that "the economic situation in Lebanon today is very poor, and it is expected that GDP will drop from $52 billion in 2019 to $18 billion in 2020. This decline is linked to two main factors: first, there is a downward trend in growth, meaning we have an economic recession with negative growth of around 20%, with official figures not yet released, and we are facing hyperinflation and a depreciation of the exchange rate. Today, companies in Lebanon are closing, thus shrinking the size of the economy, and those companies that still produce set their prices in Lebanese pounds and lose value."
Mardini noted that "the unemployment rate is rising, and living conditions are very poor as citizens' incomes are in Lebanese pounds; the higher the dollar exchange rate rises, the lower the purchasing power of the citizens."
