The Lebanese Institute for Market Studies (LIMS) has revitalized the currency exchange of the U.S. dollar, allowing millions of citizens to withdraw currency at market value.
In Lebanon’s dollarized economy, bank deposits in U.S. dollars account for 80% of the country’s currency market. An effective pressure-release valve for nations with devalued currency, dollarization is the byproduct of the volatile Lebanese pound, which has lost over 40% of its value since the economic crisis began. Responding to this devaluation of the national currency, Lebanese policymakers artificially lowered the USD/LBP exchange rate and limited bank withdrawals to the Lebanese pound only—in effect, imposing a 42% levy on all bank deposits in dollars and hurting the poorest of the poor.
After months of media exposure and meetings with policymakers, LIMS convinced central bank officials to adopt measures aimed at mitigating damage caused by the ongoing currency crisis. As a result of their efforts, small depositors with less than US$3,000 in their account are permitted to withdraw currency at market value (currently LBP2,600/$) as opposed to the “official rate” set by the central bank (currently LBP1,500/$). The central bank also formally recognized that the “official rate” is essentially arbitrary and is not set by the currency market.
LIMS’s campaign contributed to unfreezing over 1.7 million small deposits, representing the poorest 61.8% of all depositors, who, as Dr. Patrick Mardini points out, usually keep their assets in dollars. According to Dr. Mardini, “this success proves that the best way for doing development and helping the poor is through lifting institutional barriers and allowing freedom."
With LIMS's help, Lebanon has begun to lay the groundwork for long-term prosperity and financial stability.