Who Needs An Exchange Rate? I’ve Got Several!
Trying to fathom the exchange rate universe in Lebanon is simply a nightmare. This LBC International articleoutlines the five different exchange rates that the consumer faces every day. And this doesn’t include the array of black market rates reflecting the latest subsidies — or lack thereof – provided by the government. The most obvious impact has been on the cost of living where shoppers and merchants alike pine for the old days of 8 Lira to 1 USD. Beirut has the official honor of being the most expensive city in the Arab world, over 150 points higher than Dubai.
Hold your breath. The rate is at 40,000:1. Now exhale, it’s at 50,000:1. Better pay for education and health services in advance of the next shake up in the rate. According to Numbeo, which compiled the global cost of living index, the cost of living in Beirut is higher than in about 91% of the cities covered. The index is an indicator of the prices of consumer goods, transportation, and utilities. New York City is the baseline for the index, and the cost of consumer goods in Beirut is 19.7% lower than in NYC, taking into account groceries, meals, and drinks. Only the Gulf States have higher rent costs in the Middle East. Groceries are slightly less expensive than New York, but that’s when you exclude transportation. Only the UAE and Qatar are more expensive when it comes to meals and drinks.
For those living in poverty, these number have little meaning as over half of the population in Lebanon struggles to feed their families and travel to work, let alone afford shelter. What these numbers point to, however, is the inability of the government to meet the needs of the people, as even the recently adopted national budget uses several different exchange rates – none of which hold up to scrutiny. For those who have managed to hold on to their savings, the BdL has made it even more confusing to withdraw money with their mystifying circulars scrambling the options even further. Limits are set for monthly withdrawals in either Dollars or Lira, and then changed. Rates for old Dollars (Bollars) and fresh Dollars (Lollars) are at the mercy of the government, banks, and big business.
Meanwhile, brain drain and irregular immigration (via boats, mainly) continue to increase exponentially as people are left increasingly tired and fed up. According to the Byblos Bank Economic Research and Analysis group, the Consumer Price Index (CPI) increased by 179.8% in the first 11 months of 2022 compared to the same period in 2021 –starkly up 142% year to year in November alone – which is the 29th triple-digit increase since July 2020.
There are a number of factors driving the increase in the cost of living on top of the exchange rates, which are invisible taxes on the consumer. Furnishings and household equipment lead the list followed by foodstuffs and transportation. Those who were least affected lived in the Bekaa between October and November 2022.
With this disarray in the currency value and the continued inflation, it is no surprise that migration is increasing. The Jerusalem Post opines, ‘Financial collapse has caused the number of emigrants to increase by 450% in just one year, with many professionals and young people hoping for a better life elsewhere.” This is across all sectors, relevant to both private and public employees. The Arab Youth Report notes that 90% of Lebanon’s young people have indicated that they have thought about or are actively seeking immigration, the highest ratio in the Arab world. Similarly, a Gallup poll from December 2021 found that 63% of Lebanese still in the country say they want to leave forever.
The Post article further points out that “Lebanon is already one of the countries that is home to the highest proportion of elderly in the region. This new exodus will lower the birth rate and raise the average age of the population even more while falling productivity and job options impact the economy.”
It is difficult to project how this exodus will affect the future prospects for Lebanon’s recovery and revival. With a government structure unable to make efforts to reform internally and few outlets for constructive interaction with the Lebanese people, tinkering will hardly make a difference. It’s now time to embrace a radical shift in the governing equation based on a national commitment to dignity, justice, and freedom.
Disclaimer: The views and opinions expressed in these articles are those of the author and do not necessarily reflect the position of the American Task Force on Lebanon, a non-profit, nonpartisan leadership organization of Lebanese-Americans.