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According to Majd al-Masri, the president of the Syndicate of Money Changers in Lebanon, there is no actual shortage of dollar bills in the Lebanese market. He asserts that the delays in fulfilling customers’ currency exchange requests are due to a logistical issue that will soon be resolved. Mr. Masri reassures that fears of a dollar shortage are unfounded and blames illegal money changers for spreading such rumors. It is worth noting that only 300 exchange houses are licensed by the Banque du Liban (BDL), with all other money changers operating illegally.
Strong Demand
In fact, Joe Biden’s recent withdrawal from the US presidential race triggered significant market volatility last week, notably impacting the value of the US dollar against other major currencies. This volatility reportedly prompted many Lebanese expatriates, returning home for vacation, to convert their euros, British pounds, and Canadian dollars for US dollars to take advantage of the best exchange rates, in a country where the economy is heavily dollarized, as 95% of transactions are in US dollars. This surge in demand has strained the local market. Additionally, money changers have been working to secure the most favorable rates for their foreign currencies, while currency transportation companies face challenges in optimizing their routes and schedules for security and efficiency. As a result, the availability of US dollars in the local market has been delayed.
Injection of Dollars
Many indicators suggest that the market is not actually experiencing a shortage of dollars. The BDL seems to be actively increasing its hard-currency reserves by sourcing dollars from the local foreign exchange market. According to its most recent balance sheet, its reserves have reached $10.227 million.
In the past month, the BDL successfully raised over $350 million from the market. This was driven by private sector entities needing Lebanese pounds (LBP) to exchange for dollars, either for tax payments or to carry out other transactions. With Lebanese expatriates returning for the summer, this activity is expected to intensify.
Banks
For their part, commercial banks are actively implementing Circulars 158 and 166, which facilitate access to cash dollars for qualifying account holders. Since July 2021, the Banque du Liban (BDL) and the banks have each contributed half of the $2.5 million allocated, addressing 300,000 applications under Circular 158 and 170,000 under Circular 166.
Currently, the foreign exchange market remains stable and unaffected by pressure, as the supply of dollars continues to exceed demand. This stability is also reflected in reduced demand from merchants, due to the 90% dollarization of the economy, which has led customers to prefer paying for their purchases in dollars.
