Lebanon's currency hits record low as country's banks go back on strike

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Lebanon's embattled currency hit a new low Tuesday, trading at an unprecedented 100,000 Lebanese pounds to the dollar on the black market as the crisis-hit country's banks went back on strike.

The pound has kept sinking since Lebanon's financial meltdown erupted in 2019, following decades of rampant corruption and mismanagement by the country's political and financial elite. Three-quarters of Lebanon's population of over 6 million now lives in poverty and inflation is soaring.

The new rate of 100,000 pounds to the dollar was posted on mobile apps Tuesday used by private money exchangers. Exchange shops and businesses use rates off these apps, and authorities have failed to shut down the apps and crack down on a ring of suspected exchangers across the country who run the programs.

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While the official exchange rate is set by the Central Bank at 15,000 pounds for $1, the black market rate is now used for nearly all transactions.

With trust in the pound declining, most grocery stores, restaurants and other businesses have opted to start pricing their goods and services in dollars. While this "dollarization" aims to ease inflation and stabilize the economy, it also threatens to push more people into poverty and deepen the crisis.

A man counts Lebanese pounds at an exchange shop in Beirut, Lebanon, on Aug. 20, 2018. Lebanon's currency hit a new low on March 14, 2023, trading at an unprecedented 100,000 Lebanese pounds to the dollar on the black market. (AP Photo/Hussein Malla, File)

In late 2019, Lebanese banks imposed informal capital controls, restricting cash withdrawals from accounts to avoid folding amid currency shortages. People with dollar accounts could only to withdraw small sums in Lebanese pounds, at an exchange rate far lower than that of the black market.

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This effectively evaporated the savings of many across the country. Angry depositors resorted to armed bank heists, demanding their own money. Others have filed lawsuits from abroad to retrieve their money in hard currency.

Last month, Lebanese commercial banks went on an open-ended strike and angry protesters took to the streets, smashing windows and setting tires on fire outside two of the country’s biggest banks in Beirut.

The banks reopened their doors in late February following caretaker Prime Minister Najib Mikati’s request to do so for people to retrieve their salaries.

On Tuesday, the banks shuttered doors again to customers and slammed Lebanon's judiciary for not "correcting flaws" in a recent lawsuits against them.

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"The banks' cautious position unfortunately has been the right one, as the judiciary has issued more arbitrary decisions in recent days," the Association of Banks in Lebanon said in a statement last week announcing the renewal of the strike.

Lebanon has also stalled on implementing wide-range reforms agreed to with the International Monetary Fund to access $3 billion in a bailout package and unlock funds in development aid to make the economy viable again.