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The Lebanese central bank aims to bring down the price of the US dollar progressively with the agreement of licensed foreign currency dealers to help stabilise prices as much as it can, governor Riad Salameh told Reuters on Tuesday.
President Michel Aoun said on Friday the central bank would supply the currency market with dollars from Monday as part of an effort to prop up the Lebanese pound, which has shed more than 60% of its value since October.
Responding to a written question from Reuters, Salameh did not say if the central bank had started supplying the market with dollars. “Our aim is with the agreement of the licensed exchangers to bring the price of the dollar progressively lower, contributing as much as we can to stabilise the prices,” he wrote. This approach is necessary in a cash economy,” he said. “We hope that reforms will be enacted...to bring confidence.” Lebanon is grappling with an acute financial crisis seen as the biggest threat to its stability since the 1975-90 civil war.
Its currency has fallen amid a hard currency liquidity crunch, which led the state to default on its sovereign debt in March. Dollars continue to trade on a parallel market despite official efforts to regulate dealing.
Licensed foreign currency dealers agreed with the government earlier this month to work to gradually reduce the exchange rate to 3,200 pounds per dollar.
On the parallel market yesterday, one dealer said he bought dollars at a rate of 4,700 and another at 4,800. The official rates on offer at licensed dealers were 3,860/3,910.
Queues formed outside some licensed dealers, where several customers said they had bought a maximum of $200 at the 3,910 rate. Lebanon still applies an official peg of 1,507.5 pounds to the dollar for imports of fuel, medicine and wheat. A new electronic exchange trading platform will open on June 23 as part of the effort to unify the rates.
The platform was intended to act as a market maker, Salameh said. “The daily volume is $4mn on average. These amounts are purchased from the market and sold to the market. Thus the reserves of the central bank are not at stake,” he wrote. “The central bank has always been committed to preserve the stability of the pound or at least to moderate the volatility of the fluctuations in the exchange market.”
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