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It took time, but we’re getting there. Sayrafa and the market rate are gradually converging for the dollar exchange rate. That was the objective of the Central Bank (BDL) from the beginning. The IMF advocated for the unification of exchange rates and, if it’s at the Sayrafa rate, why not, they said.
From the beginning, the BDL platform attempted to play the role of a moderator in the foreign exchange market, with more or less success – quite often less than more. Incidentally, it offered gifts to some by allowing them to benefit from the difference between its rate and the market rate.
Currently, government employees can resort to it with a favorable rate to compensate for their meager salaries. Occasionally, privileged individuals who bring in sacks of Lebanese pounds also benefit from it, thus making substantial profits. This is a distortion created out of thin air. And it’s not the only one.
That being said, we are still far from the desired unification and liberalization, and from minimal monetary normalcy. The dollar is still calculated using a picturesque palette of varieties, through different circulars from the BDL, the customs rate, the electricity rate, the car rate, etc.
But why has this platform only now managed to maintain this balance with the market rate, which has been stable for over two months, while it has failed for years, leaving behind an inexorable rise of the greenback?
It would be wrong to speculate that the BDL is massively intervening on the platform by selling its dollars to achieve this stability and convergence with Sayrafa.
Firstly, because it doesn’t have the means to do so. Moreover, its “reserves” have not decreased, fluctuating for months between 9 and 10 billion dollars. The daily transactions, ranging from 100 to 200 million dollars – as repeatedly mentioned – represent the total purchases and sales by all participants (importers, travelers, remittances, OMT… and BDL).
Secondly, no matter what it does, it couldn’t have beaten the market if the market itself wasn’t more or less in balance. The proof is that the market has always prevailed in the past and imposed its prices.
This balance naturally arises from a multitude of factors which have led to a spontaneous ‘harmony’ between supply and demand around a certain rate. Sayrafa has contributed to this balance, but it couldn’t have imposed it on its own; otherwise, why wouldn’t it have done so at a lower rate? The most influencial factor is that a significant portion of people now receive at least part of their income in dollars.
The World Bank estimated that cash in dollars currently represents nearly nine billion dollars, or 45% of GDP, which is almost half of consumption. A study conducted by Infopro a few months ago arrived at almost the same conclusion: nearly half of businesses pay salaries in dollars, partially or entirely. This proportion is increasing rapidly and also affects professionals, from doctors to plumbers.
Is Sayrafa, which bridges the (small) gap between its rate and the market rate every day, destined to ultimately establish itself as the sole market value? It’s possible, but the concept itself remains irrational.
This platform was not supposed to become a permanent fixture. Total liberalization should be the norm with a floating exchange rate, as is the case in most liberal economies. In the meantime, Sayrafa was only meant to be a temporary measure, another one among all the makeshift solutions that should not have existed if we had initiated real plans for our financial purgatory. Something that the political power has been refusing for nearly four years.
This power is currently divided into three categories: one part, including Hezbollah and its allies, actively works to continuously tear apart the financial and economic fabric. Then there is a crowd of amorphous “leaders.” And finally, a few rare “stoppers,” these artisans on the verge of extinction whose role is to patch up this fabric as best they can, even if it has become a rag in the meantime.
