BEIRUT: Lebanese banks are pulling out the stops to bring in dollars as the country strives to preserve a 2-decade-old currency peg, offering high returns to customers willing to change their hard currency into long-term Lebanese pound deposits. It is one sign of Lebanon’s determination to maintain monetary stability as political leaders’ warnings of economic crisis have fueled rumors that have led the Central Bank to issue repeated assurances about the peg’s soundness.
But the Central Bank’s high interest rates that keep money flowing into banks are increasing risk within the financial system and strangling an already depressed economy.
That all comes at a time of renewed political uncertainty as Lebanon nears three months without a government.
With growth low and traditional sources of foreign exchange – tourism, real estate and foreign investment – undermined by years of regional tension, Lebanon is now relying more on the billions of dollars expatriate Lebanese deposit in local banks. The banks buy government debt, which finances the country’s eye-watering public indebtedness, and deficits.