Sudden exchange rate turmoil angers Lebanese ahead of parliamentary elections

A sudden upheaval in Lebanon’s exchange rate has angered people ahead of parliamentary elections.

Economist Louis Hobeika said the turmoil should motivate people to “vote for change and not re-elect those in power.”

He said that the ruling parties had all the time they needed to issue laws but did nothing.

The Lebanese pound hit a sudden low, trading at LBP28,000 to the dollar on Friday, with the country on official holidays until Tuesday for Orthodox Easter.

The exchange rate turmoil caused a clamor in the markets, as people said on social media that shop owners had already started pricing goods based on a rate of LBP30,000 to the dollar.

Protesters cut off the southern highway with burning tires, denouncing the deteriorating living conditions, Lebanon’s National News agency reported.

Electricite du Liban, the state-owned electricity supplier, said on Thursday that the Deir Ammar power plant had shut down. The Zahrani power plant shut down last week, leaving the Lebanese with no electricity supply until a ship carrying a fuel delivery is unloaded and tested.

Subscription fees for private generators that are charged in dollars continue to rise.

The two plants depend exclusively on Iraqi fuel as part of an agreement concluded between the two countries last August.

The state is unable to secure dollars to import additional quantities of fuel, while the agreement to draw electricity from Jordan and gas from Egypt is yet to be implemented.

According to the agreement with Iraq, every month only one shipment of 40,000 tons of gas oil is supplied to Lebanon, for the benefit of EDL.

The agreement expires in September, and EDL had pledged to ensure “a minimum level of stability in electricity supply, until May 18,” that is after the parliamentary elections on May 15.

Lebanon was supposed to start importing electricity and gas from Jordan and Egypt in March, but the implementation was delayed due to the World Bank’s failure to finance the two agreements.

Energy Minister Walid Fayyad said he had not been officially notified by the World Bank of the decision to delay funding.

“We are constantly contacting the World Bank and the US ambassador to Lebanon, Dorothy Shea, and her French counterpart Anne Grillo, and the ball is now in the court of the US administration and the World Bank to begin formal negotiations, which is an essential stage for financing,” Fayyad said on Thursday.

On Friday, the US-based Al-Hurra TV channel quoted a State Department spokesperson as saying that the government was awaiting final contracts and financing terms from the parties to ensure the gas and electricity projects complied with US policy and address any potential sanctions concerns.

Egyptian gas will be pumped to Lebanon via Jordan as well as Syria, which is subject to US sanctions under the Caesar Act.

Hobeika said the “political confusion and failure to find solutions to the problems at hand, naturally leads to chaos again.”

He added that all signs indicated that Lebanon was further deteriorating, including the value of the national currency.

“There is a clear political inability to find solutions and deal with reality, and the best evidence is the chaos and sub-standard effort that happened in the Parliament session that was held to discuss the capital control bill.

“We are only three weeks away from the parliamentary elections, and such discussions should be postponed until the elections are held. Until then, chaos will prevail, and the national currency will further depreciate.

“This is due to the bad impression the ruling authority has left, which will increase demand for the dollar. The worst thing the ruling parties are doing is trying to outsmart the International Monetary Fund. They claim they are working on reforms, but things have remained the same. Reform needs laws, and such laws don’t exist yet in Lebanon.”