If we go to the market today and ask any Lebanese citizen who owns $ 100 if he wants to convert it to 150 thousand Lebanese pounds, he will definitely refuse, as he considers the value of $ 100 higher than the value of 150 thousand pounds, but may accept to abandon them for 160 thousand pounds .
A citizen who earns his income in lira and needs to pay his bills in dollars will not find someone who sells them for 1,500 liras; Banks, in theory, have shifted to the official exchange rate; in effect, they are striving not to forfeit their dollars.
Therefore, we expect to increase all prices of imported goods and prices of local goods that depend on imported materials. If the price of the imported vacuum cleaner is $ 100, and the merchant sells it for 150 thousand pounds, these 150 thousand pounds will give him today about 93 dollars, which raises the price of the vacuum cleaner to 160 thousand pounds. However, we do not expect these goods to be discontinued from the market as long as the seller can adjust their rates to reflect the exchange rate change in the workpiece market (not in the theoretical market that does not exist). Therefore, we can say that Lebanon is not in danger of interrupting electrical tools or cars as long as the state does not intervene and allows traders to determine their prices through supply and demand.
Materials priced through a government circular, such as bread, petroleum products and medicines, are expected to be cut off from the market as in the Soviet Union and most socialist countries because they are subject to political rivalries. The sellers' group makes huge profits at the expense of the citizen if he can convince the minister to impose a high price. If the ministry imposes low prices, the goods are lost from the markets, which necessitates citizens to obtain them on the black market at twice the official price. Of course, officials prefer the second option because it allows the transfer of blame to the greed of traders. The real reason for the loss of products is that the state implicitly requires traders to buy their black market dollars on the high price and sell their products at a loss to the official price.
In the face of the option of raising prices or depriving the citizen of essential goods, the state resorted to another way, which is to ask the BDL to use the dollar reserves to finance the purchase of bread, oil derivatives and medicines. Therefore, the focus is on the size of BDL's foreign currency assets. According to Governor Riad Salameh, Lebanon has reserves of about $ 38.5 billion, in addition to $ 15 billion of gold. Compared to the $ 16 billion trade deficit, BDL's reserves are sufficient to cover the country's needs for more than two years. But Moody's latest report claims that the $ 38.5 billion includes banks' reserves at the Banque du Liban. Thus, the net amount that can be used to protect the lira exchange rate is between $ 6 and $ 10 billion. The agency pointed out that the real problem is the result of the deficit of the public budget, that is, the need for state funding, and indicates that the service of public debt in foreign currencies is expected to rise to about $ 5 billion for 2020, in addition to maturing $ 1.5 billion in November 2019.
Notwithstanding the validity of Moody's allegations, BDL cannot allow the use of its dollar stock to finance government and trade balance deficits. It should choose between two solutions: (i) financing the government and liberalizing the cutting market; or (ii) financing the needs of the public for foreign goods. And disengagement from state finances. Hence we can say that the scarcity and high price of the dollar is not due to the manipulation of traders, money changers or foreign conspiracies, but to the high state spending on public transactions, electricity and others. Will the state reform the 2020 budget and turn the treasury deficit into a surplus, or will it continue its high spending and bear the cost of the citizen on the labor market?
Source: Lebanese Republic newspaper
