Lebanese Lira Sees Unprecedented Demand
After years of severe depreciation against the US dollar, the Lebanese lira is witnessing an unusual surge in demand in the currency market. This unexpected development comes amid Lebanon’s ongoing financial crisis, which began in 2019. The increased interest in the lira reflects expectations of a potential turning point for the country, fueled by hopes of electing a new president and forming a government—steps that could restore constitutional institutions and pave the way for economic recovery.
Reasons Behind the Rising Demand
The growing demand for the lira is primarily driven by two key factors.
High Interest Rates on Lira Deposits
Lebanese banks have introduced attractive offers for new depositors, providing interest rates as high as 40% on lira accounts, provided the funds are frozen for a full year. This incentive has encouraged many citizens to convert part of their dollar savings into lira to take advantage of these high returns.
Speculation on a Lower Dollar Exchange Rate
Although less influential, some individuals are betting on the dollar dropping to 60,000 LBP if a new president is elected. This speculation has prompted some to exchange their stored dollars for lira in anticipation of potential profits.
Expert Insights
According to economic expert Dr. Mahmoud Jabaai, the high-interest offers on lira deposits have significantly increased demand for the currency. While initial interest rates reached 40%, they have recently started to decline to 25-30%, with expectations of further reductions in the near future.
Despite the renewed interest in the lira, banks remain reluctant to issue loans in any currency. The primary objective behind these high-interest lira deposits is not to finance the local economy but rather to generate liquidity for banks. This liquidity is essential for:
Paying taxes and regulatory fees.
Settling old dollar-denominated deposits at an exchange rate of 15,000 LBP per dollar, allowing banks to accumulate lira at the lowest possible cost.
Will the Trend Continue?
The key question remains: Will this demand for the lira persist, and will the dollar actually drop to 60,000 LBP after a new president is elected? While the answer is uncertain, one thing is clear—Lebanon faces new economic challenges that will require fundamental solutions to maintain the stability of the lira and the overall economy.
