June 12, 2020 / 1:33 PM / a month ago

Lebanese central bank to inject dollars to stop pound's slide

BEIRUT (Reuters) - Lebanon’s central bank will begin injecting dollars into the market on Monday, President Michel Aoun said on Friday, as it tries to stop a sharp fall in the local pound currency which has led to economic hardship and sparked unrest.

FILE PHOTO: Lebanon's President Michel Aoun meets with Lebanese political leaders to present the plan aimed at steering the country out of a financial crisis, at the presidential palace in Baabda, Lebanon May 6, 2020. Dalati Nohra/Handout via REUTERS

The Lebanese pound had slumped to about 5,000 to the dollar from around 4,100 a week earlier, igniting protests in several cities on Thursday against the deteriorating economic conditions.

One dealer who was buying dollars at 5,000 pounds before the announcement said the price had now fallen to 4,500, indicating the move may help the local currency to steady.

In total, the pound has lost some 70% of its value since October, when Lebanon plunged into a financial crisis that has seen businesses close, prices and unemployment soar, and the introduction of capital controls that have severed Lebanese from their hard currency savings.

Finance Minister Ghazi Wazni also said the pound was starting to gain ground after the announcement and would continue to do so, according to broadcaster LBCI.

Parliament speaker Nabih Berri said earlier that the government had agreed steps to reduce the dollar price to about 3,000-3,200 pounds.

The heavily indebted country has maintained an official dollar peg of 1,507.5, but dollars at this level have been rationed exclusively for imports of fuel, medicine, and wheat.

In a bid to rein in the parallel market, the central bank began a unified pricing system last week with the goal of lowering the price to 3,200. However, importers said dollars at the lower rate, which was set at 3,940 on Friday and will be gradually lowered each morning, have been unavailable.

Berri also said agreement was reached on speaking to the International Monetary Fund in “one language”, amid disagreement between MPs, the central bank and government officials engaged in talks with the Fund for an economic reform programme.

Beirut is hoping to secure billions of dollars in financing, but the talks have been stalled by internal disagreements over the value of huge losses in the financial system and proposals for how to cover them.

Aoun said that financial sector losses should not be borne by depositors but instead by the government, central bank, and commercial banks.

Reporting by Eric Knecht and Tom Perry; Editing by Alison Williams, Kirsten Donovan

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