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On October 1, 2024, a new directive from acting Lebanese Central Bank (BDL) Governor Wassim Mansouri, following a Central Council resolution on September 25, 2024, came into force. The order compels banks to triple cash withdrawal limits for beneficiaries of Circulars 158 and 166 throughout October. This exceptional, one-time decision allows recipients to receive three months’ worth of withdrawals in a single lump sum, significantly boosting the available cash. The Central Bank’s move aims to ease the burden of Lebanon’s ongoing financial and economic crises, offering temporary relief by raising withdrawal ceilings for depositors.
In analyzing the implications of BDL’s recent measure, particularly its effect on enhancing cash dollar liquidity in the market, official figures indicate that around 150,000 beneficiaries are enrolled in Circular 158, receiving monthly payouts between $300 and $400. This enables them to withdraw between $900 and $1,200 in a single transaction during October. On the other hand, Circular 166 allows monthly withdrawals of $150 and serves between 50,000 and 60,000 beneficiaries, enabling them to access $450 in one payment this month. Estimates suggest that the overall cost of implementing this measure will reach approximately $200 million for the current month. This funding (which facilitates three payments in one) will be secured as follows:
- BDL will fund two of the three payments using the banks’ mandatory reserves.
- The third due payment will be equally shared between the BDL and the banks, in accordance with the established mechanism for settling dollar transactions.
BDL sources indicate that although the adjustment to withdrawal limits is intended for only one month, the Central Council will reassess the situation before the end of this month to determine the necessary measures for the upcoming month. These sources emphasize that BDL’s decision aims to increase the monthly withdrawal limits for depositors from their “old” accounts.
In a related development, BDL has once again facilitated the payment of public sector salaries in US dollars. Following the Ministry of Finance’s transfer of public sector salaries from its accounts in Lebanese pounds to the Central Bank, the bank intervened by purchasing these pounds to secure dollars for disbursing salaries and pensions. As a result, BDL injected approximately $130 million into the market this month. This amount is, in addition to the funds to be injected through Circulars 158 and 166, bringing the total injected into the market through banks to $330 million.
Official figures show that the monetary supply in LBP continues to decline, currently standing at approximately LBP 53 trillion, down from LBP 58 trillion the previous month. This trend reflects the ongoing policy of “removing” the currency from circulation. As the LBP monetary supply contracts, interbank interest rates are on the rise. While borrowing among banks in LBP is not a new phenomenon and has been practiced for years, it has recently intensified due to LBP scarcity resulting from the Central Bank’s monetary and fiscal policies, which focus on controlling its supply and refraining from expanding the monetary base without printing additional currency.
The daily interest rate is determined by market supply and demand, increasing during periods of LBP scarcity and decreasing when supply in the market and banks improves. As an indicator of this shortage, LBP interbank interest rates have surged to 120%, a notably high level that underscores the urgent demand for this currency amid a poor supply.
In a related context, the dollar exchange rate in the market remains stable at around LBP 89,500. However, a concerning development has emerged with the resurgence of “fake” electronic applications operated from abroad, attempting to manipulate the LBP exchange rate and create confusion in the markets. This situation raises questions about the timing of these applications’ reemergence and their true motives. Reports indicate that security forces are actively monitoring speculators who have reactivated their WhatsApp groups to disseminate rates from these fraudulent applications, seeking to profit and manipulate the market.
