Lebanon's numerous exchange rates are forcing international donors to use cash dollars instead of the local currency in an effort to support the country's poor amid a severe economic crisis, sources told The National.
The World Bank and Lebanon's Finance Ministry agreed this week that a $246 million loan to support Lebanon's poorest families would not be disbursed in Lebanese pounds, as initially announced in January, but in US dollars.
The announcement came a week after the Lebanese army, which is increasingly dependent on international donations to feed its soldiers, asked Iraq to send a $2 million donation in cash instead of going through Lebanese banks. A plane laden with banknotes landed in Beirut on May 17.
The request was confirmed by a Lebanese army source and an Iraqi Defence Ministry official.
"There will be more financial aid, but details have not been agreed on yet," the Iraqi official said.
The army source said that the money would be spent on food and medicine for its 80,000 soldiers.
Neither side gave an official explanation for the army's request, but analysts were not surprised.
“Institutions are trying to bypass the banking system and the Lebanese pound,” said financial analyst Mike Azar.
“We have been moving to a cash economy for the last 18 months as the banking system remains insolvent. The currency crisis and multiple exchange rate system makes it challenging to do business in Lebanese pounds.”
Several exchange rates have co-existed in Lebanon since November 2019, when Lebanese banks severely restricted access to foreign currencies and banned transfers abroad, plunging the small Mediterranean country into its worst economic crisis yet.
The official peg of 1,507.5 Lebanese pounds to the dollar, in place since 1997, remains artificially in place.
But the market rate, which fluctuates daily, has reached nearly 13,000 Lebanese pounds to the greenback, causing inflation to rocket as importers buy products in cash, using dollars.
Shops, restaurants and hotels are increasingly adjusting their prices in Lebanese pounds to the market rate.
Day-to-day living is a challenge for the impoverished Lebanese, whose salaries have not followed the steep inflation curve.
Meanwhile, banks allow depositors to withdraw their dollars stuck in banks at the rate of 3,900 Lebanese pounds to the dollar.
Lebanon’s central bank chief Riad Salameh has repeatedly said that depositors’ money was safe and promised on Monday that small depositors would be able to access some of their dollars at the end of June.
But his claims have done little to boost confidence in Lebanese banks. In a report released on Monday, S&P Global said that bailing in depositors, for example, by paying them below-market exchange rates, or converting deposits into equity, seems likely.
"The dollarisation of aid is an extreme and temporary solution that has only ever been implemented in countries like Zimbabwe in the past"
The World Bank struck a deal last year with Lebanese authorities to disburse its $246 million loan at the rate of 6,240 Lebanese pounds to the dollar. At the time, this rate was close to the market rate, which has since plummeted.
But the decision came under fire from civil society. They accused the World Bank of enriching the central bank. "The deal wasn't balanced any more," said a diplomat who closely followed the negotiations.
The source told The National that donors will continue disbursing aid in cash dollars, or in Lebanese pounds at the market rate – which is technically illegal but largely tolerated by local authorities – until the exchange rates are unified.
“The dollarisation of aid is an extreme and temporary solution that has only ever been implemented in countries like Zimbabwe in the past,” they said.
"The fundamental driver is to give aid that is fair to the people," the diplomat said.
“It’s not the rule, it’s not recommended, it’s done on an emergency basis and should not be done for ever,” said Jamal Saghir, distinguished fellow at the Institute of Financial Economics at the American University of Beirut.
"But keep in mind that what is happening to Lebanon is also rare. Lebanon's economy is now in a situation of sudden stop. It is facing multiple exchange rates and deep accumulation of interrelated political, social, economic, financial, and environmental crises, with no action from the government. So the international community is doing substitution work," he said.
The World Bank told The National in an email that beneficiaries of its social safety net programme, which will target 147,000 extremely poor Lebanese households, will receive prepaid cards. They can use them to pay for products in shops or withdraw cash dollars from ATMs.
Most ATMs do not dispense foreign currencies any more, but there are exceptions for so-called "fresh dollar" accounts, which allow depositors to withdraw dollars sent from abroad under certain conditions.
Unlike Iraq's direct cash donation to the Lebanese army, the World Bank loan is expected to be deposited at the central bank and then transferred to an account managed by the World Food Programme.
The World Bank said that the Lebanese government must meet “effectiveness and disbursement conditions” before the programme, which also aims to support education costs and social services, can begin.
Caretaker prime minister Hassan Diab suggested a cash assistance plan that would cost close to $1 billion. The plan was signed off by President Michel Aoun on Wednesday and must now be approved by parliament, but it seems unlikely this will happen soon.
Local MPs criticised it after Mr Diab told the media that Lebanon would have to dip into the central bank's mandatory foreign currency reserves to finance it.
The Lebanese government has been paralysed since a deadly explosion at the port in Beirut last August that forced Mr Diab to step down. Politicians, who are widely perceived as corrupt, have been bickering over how to allocate ministerial posts in the new Cabinet.
“What is fundamental is transparency. If it’s not transparent there is room for corruption,” said Mr Saghir, a former director at the World Bank.
"From my experience, going through the World Bank is much better than a government cash transfer system. The World Bank will establish a strict framework, do follow-up and close supervision," he said.
The World Bank told The National that anti-corruption and transparency measures will include "rigorous targeting and verification" of all beneficiaries and the "recruitment of an independent third party monitoring agent" to verify their eligibility.
With additional reporting from Sinan Mahmoud in Baghdad
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Afcon 2019
SEMI-FINALS
Senegal v Tunisia, 8pm
Algeria v Nigeria, 11pm
Matches are live on BeIN Sports
THE SPECS
Engine: 1.5-litre, four-cylinder turbo
Transmission: seven-speed dual clutch automatic
Power: 169bhp
Torque: 250Nm
Price: Dh54,500
On sale: now
RESULTS
5pm: Handicap (TB) Dh100,000, 2,400m
Winner: Recordman, Richard Mullen (jockey), Satish Seemar (trainer)
5.30pm: Wathba Stallions Cup Handicap (PA) Dh 70,000, 2,200m
Winner: AF Taraha, Tadhg O’Shea, Ernst Oertel
6pm: Abu Dhabi Fillies Classic Prestige (PA) Dh110,000, 1,400m
Winner: Dhafra, Fabrice Veron, Eric Lemartinel
6.30pm: Abu Dhabi Colts Classic Prestige (PA) Dh110,000, 1,400m
Winner: Maqam, Fabrice Veron, Eric Lemartinel
7pm: Handicap (PA) Dh85,000, 1,600m
Winner: AF Momtaz, Fernando Jara, Musabah Al Muhairi
7.30pm: Maiden (PA) Dh80,000, 1,600m
Winner: Optimizm, Patrick Cosgrave, Abdallah Al Hammadi
The five pillars of Islam
Zayed Sustainability Prize
UAE currency: the story behind the money in your pockets
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
KILLING OF QASSEM SULEIMANI
Results
6.30pm: Mazrat Al Ruwayah Group Two (PA) US$55,000 (Dirt) 1,600m; Winner: Rasi, Harry Bentley (jockey), Sulaiman Al Ghunaimi (trainer).
7.05pm: Meydan Trophy (TB) $100,000 (Turf) 1,900m; Winner: Ya Hayati, William Buick, Charlie Appleby.
7.40pm: Handicap (TB) $135,000 (D) 1,200m; Winner: Bochart, Richard Mullen, Satish Seemar.
8.15pm: Balanchine Group Two (TB) $250,000 (T) 1,800m; Winner: Magic Lily, William Buick, Charlie Appleby.
8.50pm: Handicap (TB) $135,000 (T) 1,000m; Winner: Waady, Jim Crowley, Doug Watson.
9.25pm: Firebreak Stakes Group Three (TB) $200,000 (D) 1,600m; Winner: Capezzano, Mickael Barzalona, Salem bin Ghadayer.
10pm: Handicap (TB) $175,000 (T) 2,410m; Winner: Eynhallow, Mickael Barzalona, Charlie Appleby.
The years Ramadan fell in May
Fixtures
Tuesday - 5.15pm: Team Lebanon v Alger Corsaires; 8.30pm: Abu Dhabi Storms v Pharaohs
Wednesday - 5.15pm: Pharaohs v Carthage Eagles; 8.30pm: Alger Corsaires v Abu Dhabi Storms
Thursday - 4.30pm: Team Lebanon v Pharaohs; 7.30pm: Abu Dhabi Storms v Carthage Eagles
Friday - 4.30pm: Pharaohs v Alger Corsaires; 7.30pm: Carthage Eagles v Team Lebanon
Saturday - 4.30pm: Carthage Eagles v Alger Corsaires; 7.30pm: Abu Dhabi Storms v Team Lebanon
Overall standings
1. Christopher Froome (GBR/Sky) 68hr 18min 36sec,
2. Fabio Aru (ITA/AST) at 0:18.
3. Romain Bardet (FRA/ALM) 0:23.
4. Rigoberto Uran (COL/CAN) 0:29.
5. Mikel Landa (ESP/SKY) 1:17.
Killing of Qassem Suleimani
Dubai works towards better air quality by 2021
Dubai is on a mission to record good air quality for 90 per cent of the year – up from 86 per cent annually today – by 2021.
The municipality plans to have seven mobile air-monitoring stations by 2020 to capture more accurate data in hourly and daily trends of pollution.
These will be on the Palm Jumeirah, Al Qusais, Muhaisnah, Rashidiyah, Al Wasl, Al Quoz and Dubai Investment Park.
“It will allow real-time responding for emergency cases,” said Khaldoon Al Daraji, first environment safety officer at the municipality.
“We’re in a good position except for the cases that are out of our hands, such as sandstorms.
“Sandstorms are our main concern because the UAE is just a receiver.
“The hotspots are Iran, Saudi Arabia and southern Iraq, but we’re working hard with the region to reduce the cycle of sandstorm generation.”
Mr Al Daraji said monitoring as it stood covered 47 per cent of Dubai.
There are 12 fixed stations in the emirate, but Dubai also receives information from monitors belonging to other entities.
“There are 25 stations in total,” Mr Al Daraji said.
“We added new technology and equipment used for the first time for the detection of heavy metals.
“A hundred parameters can be detected but we want to expand it to make sure that the data captured can allow a baseline study in some areas to ensure they are well positioned.”
Tips for newlyweds to better manage finances
All couples are unique and have to create a financial blueprint that is most suitable for their relationship, says Vijay Valecha, chief investment officer at Century Financial. He offers his top five tips for couples to better manage their finances.
Discuss your assets and debts: When married, it’s important to understand each other’s personal financial situation. It’s necessary to know upfront what each party brings to the table, as debts and assets affect spending habits and joint loan qualifications. Discussing all aspects of their finances as a couple prevents anyone from being blindsided later.
Decide on the financial/saving goals: Spouses should independently list their top goals and share their lists with one another to shape a joint plan. Writing down clear goals will help them determine how much to save each month, how much to put aside for short-term goals, and how they will reach their long-term financial goals.
Set a budget: A budget can keep the couple be mindful of their income and expenses. With a monthly budget, couples will know exactly how much they can spend in a category each month, how much they have to work with and what spending areas need to be evaluated.
Decide who manages what: When it comes to handling finances, it’s a good idea to decide who manages what. For example, one person might take on the day-to-day bills, while the other tackles long-term investments and retirement plans.
Money date nights: Talking about money should be a healthy, ongoing conversation and couples should not wait for something to go wrong. They should set time aside every month to talk about future financial decisions and see the progress they’ve made together towards accomplishing their goals.
Fixtures
%3Cp%3E%3Cstrong%3EWednesday%2C%20April%203%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3EArsenal%20v%20Luton%20Town%2C%2010.30pm%20(UAE)%3C%2Fp%3E%0A%3Cp%3EManchester%20City%20v%20Aston%20Villa%2C%2011.15pm%20(UAE)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EThursday%2C%20April%204%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3ELiverpool%20v%20Sheffield%20United%2C%2010.30pm%20(UAE)%3C%2Fp%3E%0A
What sanctions would be reimposed?
Under ‘snapback’, measures imposed on Iran by the UN Security Council in six resolutions would be restored, including:
- An arms embargo
- A ban on uranium enrichment and reprocessing
- A ban on launches and other activities with ballistic missiles capable of delivering nuclear weapons, as well as ballistic missile technology transfer and technical assistance
- A targeted global asset freeze and travel ban on Iranian individuals and entities
- Authorisation for countries to inspect Iran Air Cargo and Islamic Republic of Iran Shipping Lines cargoes for banned goods
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
The biog
Place of birth: Kalba
Family: Mother of eight children and has 10 grandchildren
Favourite traditional dish: Al Harees, a slow cooked porridge-like dish made from boiled cracked or coarsely ground wheat mixed with meat or chicken
Favourite book: My early life by Sheikh Dr Sultan bin Muhammad Al Qasimi, the Ruler of Sharjah
Favourite quote: By Sheikh Zayed, the UAE's Founding Father, “Those who have no past will have no present or future.”
More coverage from the Future Forum
Indoor cricket in a nutshell
Indoor Cricket World Cup - Sept 16-20, Insportz, Dubai
16 Indoor cricket matches are 16 overs per side
8 There are eight players per team
9 There have been nine Indoor Cricket World Cups for men. Australia have won every one.
5 Five runs are deducted from the score when a wickets falls
4 Batsmen bat in pairs, facing four overs per partnership
Scoring In indoor cricket, runs are scored by way of both physical and bonus runs. Physical runs are scored by both batsmen completing a run from one crease to the other. Bonus runs are scored when the ball hits a net in different zones, but only when at least one physical run is score.
Zones
A Front net, behind the striker and wicketkeeper: 0 runs
B Side nets, between the striker and halfway down the pitch: 1 run
C Side nets between halfway and the bowlers end: 2 runs
D Back net: 4 runs on the bounce, 6 runs on the full
Women & Power: A Manifesto
Mary Beard
Profile Books and London Review of Books
