PUBLICIDAD

Iberdrola

Lebanon's hyperinflation continues to drive up purchasing costs

The country recorded its 26th consecutive month of triple-digit inflation in September
Libra libanesa

AP/HUSSEIN MALLA  -   The Lebanese pound has reached an all-time low

Business conditions and the exchange rate continue to grow, giving rise to multiple conflicts across the state. Weak exchange rates continue to drive purchasing costs higher. Despite shrinking in the month of September, as the summer season draws to a close, Lebanon is seeing a noticeable decline in tourist spending arrivals. In addition, strikes by banks are exacerbating a situation that seems to have no short-term solution, as stated by Stephanie Aoun, research analyst at Blominvest Bank. 

That is why several customers, some of them armed, stormed at least four branches on Tuesday seeking to forcibly withdraw their trapped savings, a week into the closure of the institutions. Due to cash shortages, banks have imposed informal limits on withdrawals. The raids since mid-September reflect the growing anger of the population at the banks and the authorities who have been trying to reform the country's corrupt and ailing economy.

libano-economia
REUTERS/MOHAMED AZAKIRA  -   The Central Bank of Lebanon building in Beirut

"We are sending a message to the banks that their security measures will not stop the depositors, because they are all fighting back," Depositors' Media Coordinator Moussa Agassi told The Associated Press. "We are trying to tell the bank owners to try to find a solution, and implementing security measures is not going to keep them safe." 

Such is the situation in the country that a depositors' association said Saheli, a mother, had repeatedly asked the bank to transfer $4,300 to her son who is studying in Ukraine after being expelled from his university and residence due to his failure to pay both tuition and rent. Saheli desperately underwent medical checks to determine whether she could sell a kidney to secure the necessary money, the association added. 

As a result, business activities in the country are being affected, with inflation plaguing the state, difficult governance and a weakening currency creating a lot of uncertainty for those who want to invest. The country's production is also being affected. Although work backlogs have been reduced for the first time in three months, the estimated 90% devaluation of the pound against the dollar continues to exacerbate inflationary pressures. The power of hyperinflation is such that it is estimated that possession of $10,000 in 2015 would currently be equivalent to less than $400.

Economía Líbano
AP/HUSSEIN MALLA  -   People queue outside an exchange office to buy US dollars, in Beirut, Lebanon

This has led to price increases as companies seek to make their customers bear the cost overruns generated by hyperinflation. Compared to the previous year, prices have risen by 7.6%, bringing inflation to 162%. If this growth continues, the country would be at the bottom of the list, only ahead of Sudan, according to Fitch Solutions. The World Bank has described Lebanon's economic crisis as one of the worst in more than a century. Security forces guard a branch of Byblos Bank. In order to alleviate the situation, the IMF called on the Lebanese authorities to implement structural and financial reforms in order to obtain the $3 billion in assistance to try to alleviate the effects. Because the country is in a situation of governmental deadlock, these reforms have been stalled since March. It is hoped that by 31 October, when Michel Aoun's mandate ends, a government can be formed that can carry out the reforms that the IMF is asking for in order to implement the loan, and thus be able to ease what some classify as the worst crisis in Lebanon's history.