Two factors in the economy and the political game behind exchange rate stability

Two factors in the economy and the political game behind exchange rate stability

| Wednesday 03 May 2023

Omar al-Rassi, “Akhbar al-Yawm” agency

Ajaka to "Akhbar Al-Yawm": the "inaptocratie" is the system that applies to Lebanon

The year 2022 ended and the US dollar exchange rate was below 45 thousand, but at the beginning of the year, it began to increase significantly, until in the second half of March it reached the threshold of 140 thousand, then it stabilized in a very short period below one hundred thousand.

Since the end of last March, the US dollar exchange rate on the black market has been ranging between 96 and 98 thousand, so will this stability last and does it really reflect the real value of the Lebanese pound according to economic, monetary and scientific data?

Economist Professor Jassem Ajaka, via the "Akhbar Al-Yawm" agency, believes that politics plays an active role in the stability of the exchange rate, in addition to promoting two basic measures at the economic level:

First: linking all financial movements to Sayrafa platform, and therefore withdrawing lira from the market automatically whenever the dollar rises, as if there is an internal system that withdraws lira whenever there is an infusion of the Lebanese currency in the markets.

Second: the request of the Ministry of Finance from traders to pay fees in Lebanese pounds.

Thus, these two measures led to a significant absorption of the Lebanese currency, but the stability of the exchange rate is related to politics.

Is it likely that the exchange rate will fall if there is a political breakthrough at the level of the presidential elections?

Ajaka says: a large part of the exchange rate movement is related to the political game, even if the reasons for hitting the currency and the economy exist, but the dollar price on the black market above 95 thousand pounds does not reflect the reality of the economy and money, as in three months it jumped from 40 thousand to 140, to stabilize again at the current ceiling, but in economics we cannot witness this kind of jumps for currencies subject to supply and demand only, as the transition from one point to another is gradual.

And here Ajaka repeats: this confirms that the story is political, and if there is an agreement with some reforms, the exchange rate could fall again.

Speaking about the importance of developing a plan to manage the next stage, Ajaka expresses his fear of the continuation of theft and corruption, recalling the "inaptocratie" that appeared in the seventies of the last century, which is derived from the word "inapte", meaning that a group of losers elect a group of unqualified to manage the affairs of the country without any plan, while the goal is only to withdraw money through taxes. This literally applies to the Lebanese reality.

He explains this theory by saying: returning to the official figures, 50% of the Lebanese people did not participate in the parliamentary elections, and according to the results, more than half of the council members are loyalists, which means that 25% of the Lebanese people elected this ruling class of the country today, and therefore this does not reflect a free democratic system.

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