The Lebanese lira has reached a historic low, with the country’s largest banknote now worth only $1, according to reports. The new rate came into effect on Tuesday, marking the latest chapter in the country’s economic crisis, which has left more than 80% of the population in poverty, according to the UN.
Before the crisis hit in 2019, the 100,000-pound note was worth $67. However, the currency’s relentless decline means that it now takes 10 million pounds, or 100 of the country’s largest banknotes, to buy $100. This has raised questions about the need for smaller denominations such as the 1,000 and 5,000 notes, as coins have largely become obsolete.
Lebanon is heavily reliant on imports, but most international agents do not accept pounds, forcing importers to pay in dollars. This has driven up the cost of goods and services, with supermarkets and most shops displaying prices in dollars.
Why the Lebanese lira is doing so badly
Meanwhile, Lebanese salaries have not kept pace with inflation and the devaluation of the pound, leading to a severe reduction in purchasing power for most people. The currency is still officially pegged at 15,000 liras to the dollar by Lebanon’s central bank, but private dealers reported a new record low in the shadow economy on Tuesday.
Lebanese banks have imposed strict restrictions on withdrawals for several months, leading to public outrage and even armed raids by depositors. Banks were closed on Tuesday as they continued an indefinite strike in protest against judicial measures aimed at lenders. Judges have sought to seize the funds of bank directors and board members, as well as force them to pay dollar deposits at the pre-crisis exchange rate.
The huge decline in the lira has forced businesses to set prices in dollars, while those paid in liras are now struggling to buy basic goods. An estimated 80% of Lebanon’s population is now living below the poverty line, as part of what the World Bank has deemed potentially one of the three worst economic crises of modern times.
Lebanon’s currency is the worst performing in the world this year, according to data compiled by Bloomberg. The situation is unlikely to improve any time soon, with residents continuing to navigate the hardships caused by the economy’s rapid decline and the currency’s seemingly endless plunge.