Lebanon News

Shortage inspires creativity for Lebanese seeking dollars

Bundles of banknotes of U.S. Dollar are pictured at a currency exchange shop in Ciudad Juarez, Mexico, January 15, 2018. REUTERS/Jose Luis Gonzalez

BEIRUT: Eleven days after nationwide anti-government protests began in Lebanon, Central Bank Gov. Riad Salameh assured the nation that there would be no capital controls and no “haircut” on banking deposits. This announcement came minutes after he told CNN that Lebanon was “days away” from economic collapse.

Salameh later clarified to Reuters that he had meant to say that Lebanon needed “a solution in a matter of days to regain confidence and avoid collapse in the future.”

He later sought to further assuage concerns, saying that the bank had usable foreign cash reserves of $30 billion and total assets of $38 billion.

In the middle of all of this uncertainty, the Lebanese pound continues to tumble in value, and individual Lebanese banks are imposing their own arbitrary capital controls on depositors. These measures include strict limits on the withdrawal of hard currency.

Last weekend, Salameh confirmed that he was asking the government for “exceptional powers” to regulate and standardize controls that commercial banks are imposing on depositors, in order to ensure “fair relationships” between banks and customers.

However, facing a critical shortage of hard currency, Lebanese residents have been forced to find alternative means to procure U.S. dollars.

Three men, who spoke to The Daily Star on condition of anonymity, said that they have taken the 45-minute flight from Beirut to Cyprus multiple times, in order to change their savings into dollars.

For one, an average trip to the island entails taking three debit cards: his own, his wife’s and one for their joint account. Once there, he withdraws $1,000 per day on each card from ATMs in Turkish currency, then goes to an exchange dealer and converts the money into dollars.

“You do lose some money in commission fees, but the trip isn’t that expensive when we split a hotel room,” he said.

Over the course of a three-day weekend, each individual was able to bring back just under $10,000 each.

Another man, who made the journey separately, recognized that such actions were hurting Lebanese banks. Still, he said, there was no other choice.

“At the end of the day, the ATM we are withdrawing from will end up being paid by my Lebanese bank, so this money will leave Lebanon. But I’m bringing dollars back to the country to eventually spend, so it all equals out,” he explained.

Yet another man preferred to visit Cypriot casinos, where he would buy large amounts of poker chips using a credit card.

“I’d pretend like I was playing in the casino for a couple hours, then go to cash out with the same chips I bought using my credit card,” he said. “They eventually caught on and now it’s much more difficult.”

For others, it is easier to ask friends and family members traveling to Lebanon from abroad to bring cash with them.

One gas station owner told The Daily Star that he had resorted to this method because he “hadn’t seen” a U.S. dollar for two months.

In Lebanon, gas stations are paid by drivers in local currency. However, their owners are forced to pay 15 percent of purchase costs to fuel importers in U.S. dollars.

“The bank gave me $100 last week as my limit. I own a gas station and have other companies. What exactly would $100 do?” he asked.

Another way for Lebanese residents to get their hands on U.S. dollars is to exchange checks for cash.

One man who spoke to The Daily Star has, on at least two occasions, taken a check in U.S. dollars from someone in return for cash of a lesser value. “In one instance, I took a check for $1,100 from someone I know and gave him $800 in cash,” he told The Daily Star.

He is taking a gamble, though, as he cannot cash the checks he is given. He can deposit them in his account, but has to wait for a full year, in the instance of one check, before he can access the funds.

“I get some interest on my savings and I can afford not having these little amounts not accessible right now. I know it’s risky,” he said.

The situation creates the perfect environment for a thriving industry of money laundering. With so much money being transferred through legitimate exchange shops and the black market, there is little room for any form of state supervision.

But that is perhaps not the most immediate concern for the banks. As the frustrations of customers continue to grow, commercial bank branches are being routinely vandalized, while their employees are frequently the targets of physical violence.

Parliament Speaker Nabih Berri said Monday that a caretaker government is unable to approve certain “exceptional powers.” He did not elaborate on this point, and it was unclear whether he was even referring to Salameh. One thing, however, is obvious - that something must be done to halt Lebanon’s spiraling financial crisis, before it’s too late.

 
A version of this article appeared in the print edition of The Daily Star on January 16, 2020, on page 2.

Recommended





Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (http://bit.ly/vDisqus)

comments powered by Disqus

Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here