(Adds details, context)
BEIRUT, April 3 (Reuters) – Lebanon’s central bank said on Friday it was launching a foreign exchange unit to centralise the price of dollars for money-changers, part of efforts to rein in the parallel market as hard currency runs short amid a deepening financial crisis.
In a separate circular, it said deposits of less than $3,000 could be withdrawn in Lebanese pounds at a “market” rate, allowing the country’s smallest depositors to cash out their savings despite tight banking controls.
Neither circular defined the market rate.
“We will choose the dealers with which we transact. We work on banknotes only at market rate. We buy and sell,” central bank governor Riad Salameh told Reuters.
He said the official currency peg would be maintained in bank transactions and for imports of critical goods: medicine, fuel and wheat.
The Lebanese pound has been officially pegged at 1,507.5 pounds to the U.S. dollar for 22 years, but in recent months it has been widely traded on an informal parallel market which has become the main source of cash for people during the crisis.
Its value there has plunged by nearly 50% versus the official rate since October, after foreign investment inflows dried up and anti-government protests erupted.
The currency has traded at around 2,800 pounds per dollar on the informal market in recent days despite efforts by authorities to enforce a rate of 2,000 pounds per dollar.
A senior government source told Reuters Friday’s central bank measure will allow the full withdrawal of about 60% of all bank deposits. Banks have capped cash withdrawals at as little as $100 per week in recent months as the crisis escalated.
The source also said a market rate for the Lebanese pound would be set daily and that exchange houses which did not follow it would have their licenses revoked.
The second circular said banks must now pay out deposits of 5 million Lebanon pounds or less at the request of customers. It said this would be done by converting the funds first to U.S. dollars at the peg and then back to Lebanese pounds at the market rate that day.
The battered currency has come under more pressure during Lebanon’s coronavirus lockdown, with banks halting access to already scarce dollars and forcing up the cost of imports on which the heavily indebted country relies. (Reporting by Ellen Francis, Laila Bassam and Eric Knecht, Writing by Ellen Francis; Editing by Catherine Evans)
Source: Read Full Article