BEIRUT — Lebanon is unable to apply its new exchange rate after its incumbent president declared the state budget unconstitutional and refused to approve it, officials said Thursday.
In late September, the finance ministry announced that Lebanon would change its dollar-pegged exchange rate from 1,500 pounds to 15,000 pounds from November 1, which it called a “necessary corrective action.” , which included the modified rate. However, it took at least another week of bureaucracy before it reached President Michel Aoun’s office.
The adoption of the 2022 state budget and the unification of Lebanon’s various exchange rates are among the prerequisite reforms needed to achieve an International Monetary Fund-approved recovery plan to make the country viable again.
The government has adopted several exchange rates for different services apart from the official rate, most recently for telephone and internet bills, while an opaque – or black – parallel market rate has been the dominant exchange rate, causing further chaos in the country’s economy. .
The Lebanese pound was pegged at just over 1,500 pounds to the dollar in 1997 to encourage investor confidence and curb hyperinflation after its 15-year civil war. Since then, the economy has struggled after years of paralysis and political turmoil.
At the end of 2019, the country began to slide into what the World Bank considers to be one of the worst economic crises in more than a century. Three-quarters of the population plunged into poverty and the Lebanese pound lost about 90% of its value against the dollar on the black market.
Aoun’s six-year term ended on October 31. His refusal to sign the budget means it will automatically pass and go into effect later this month. Government and economic advisers familiar with the matter say Aoun’s inaction was intentional.
An adviser familiar with the matter told The Associated Press that Aoun did not approve several items of the state budget that went through the government and parliament. Speaking on condition of anonymity in accordance with regulations, the adviser added that the final accounts for last year were not completed to close the books under the country’s constitution. They said Aoun did not want to sign legislation he deemed unconstitutional.
Spokespersons for the Ministry of Finance and the central bank told the AP that they had not modified their decrees which introduced the new monetary parity, but that they could only come into force if the budget did so. was also doing.
Another adviser added that Aoun did not see the finance law as meeting the expectations of the International Monetary Fund, but did not want Lebanon to be without a budget. Speaking on condition of anonymity because they were not authorized to speak to the press, they added that the delay would allow the budget to pass but without the president’s approval.
Lebanon’s parliament, deeply divided since late September, has repeatedly failed to vote for a successor. Lebanon also lacks a full-fledged government, with Prime Minister Najib Mikati’s government operating in a limited transitional capacity.