Report: Lebanon Planning to Devalue Currency by 93%, Depositors to Lose $38 Billion

The Lebanese authorities is reportedly planning to devalue the native foreign money by as much as 93% in a determined bid to obtain funding from the International Monetary Fund (IMF). As a part of the plan, a serious portion of international foreign money deposits within the banking system will likely be transformed into native foreign money at totally different trade charges.

Bailout Only Path Out of Crisis

In a bid to deal with its monetary disaster, the Lebanese authorities is reportedly pursuing a plan that may see the nation’s native foreign money being devalued by 93%. In addition, the federal government plans to transform a good portion of international foreign money deposits within the banking system into the Lebanese pound.

According to a Reuters report, the Lebanese authorities hopes pursuing this monetary plan will allow the nation to safe a bailout from the International Monetary Fund (IMF). This bailout is seen as Lebanon’s solely path out of a long-running monetary disaster.

The report on Lebanon’s newest plan to devalue its foreign money comes almost two months after the central financial institution issued a directive — one which not directly devalued the trade fee for residents withdrawing from their greenback financial savings accounts. Immediately after the directive took impact, many Lebanese residents, with funds trapped in international currency-denominated financial savings accounts, reportedly besieged banks as they tried to money out their funds.

The authorities’s newest plan will lead to holders of international currency-denominated financial savings accounts ceding all their financial savings to the federal government at a number of conversions, together with one which devalues the pound by 75%.

Aligning Lebanon’s Exchange Rates

The goal of the federal government monetary plan is to align the official trade fee with that of the parallel market. Doing so has been the IMF’s key demand to the Lebanese authorities. At the time of writing, the Lebanese pound’s official trade fee versus the U.S. greenback stands at 1,511 to at least one, whereas on the parallel market, one USD buys 21,300 Lebanese kilos.

Meanwhile, the Reuters report explains that as a part of the federal government’s plan, depositors are anticipated to incur losses amounting to $38 billion whereas the federal government itself, shareholders in banks, and the central financial institution will incur a mixed lack of $31 billion. The plan provides that the Lebanese authorities will return $25 billion to depositors in a interval not exceeding 15 years.

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