Total collapse – Lebanon’s Currency Crisis Explained

Corrupt oligarchs

But since September, the lira has lost 85 to 90 per cent of its value – to the extent that the exchange rate on the streets is 9,500 to 10,000 lira to the dollar. The government rate remains the same ($1=1,507) but almost no one has access to that rate, except for the corrupt oligarchs and politicians who are the cause of most of Lebanon’s ills.

The situation can be described as follows: “There used to be a middle class in Lebanon, but now the rich are rich, the middle class has become poor and the poor have become destitute.”

Meat at $42 a kilo

What does this mean? Say you salary was $500 a month. You could expect to be paid 750,000LP or $500 and it would be the same. But now, you are paid 750,000LP, and that is the equivalent of $75. In other words, you cannot buy goods or services worth $500 with 750,000LP. For instance, thanks to the collapse in currency, red meat, which was about $9 a kilogramme before the collapse, is now more than $42 a kilo. Red meat has become such a luxury that even the army cannot afford it on its anymore and has struck it off the menu for soldiers.

Dearth of dollars

Those who saved their money in lira in the banks have seen a lifetime’s savings simply wiped out. Even those who were smart enough to keep their savings in dollar accounts now cannot access their precious dollars. Simply because there aren’t enough dollars in the Lebanese financial system. Banks have imposed severe restrictions on how much you can withdraw from your own bank account; usually, it is about $200 a week.

The dearth of dollars has meant that Lebanon, a country that imports more than 80 per cent of its daily needs, can suddenly not afford to do so, leading to severe shortages in supermarkets.

Hyperinflation has set in, and the buying power has almost vanished.

Barter economy

As the financial crisis reaches the abyss, many Lebanese have resorted to the ancient barter system, especially on Facebook groups. Gym equipment is being exchanged for canned food; car spare parts for baby milk formula. There is every sign that Lebanon heading for a Zimbabwe or Venezuela-style collapse. And this comes at a time when it also has to deal with COVID-19.