Timour Azhari — Al Jazeera — BEIRUT, LEBANON – Lebanon’s Central Bank on Friday said depositors with small dollar-denominated accounts would soon be able to withdraw – and withdraw in local currency – money that has been trapped in the Lebanese banking system for almost half a year. The cash will be disbursed at a market rate set daily on an online platform. A senior banking source told Al Jazeera that the platform is expected to be ready within a week to 10 days, at which point the new measures may go into effect. The decision was made public in a circular released by Lebanon’s central bank. It will allow people with accounts containing $3,000 or less to withdraw their money in Lebanese pounds at the market rate, which is substantially higher than the official rate. The market rate on Friday stood at 2,800 Lebanese pounds to the United States dollar, compared to the official rate of 1,500 Lebanese pounds to the dollar, according to a daily survey of exchange dealers across the country, published online.
Lebanon’s currency has been pegged to the dollar at 1,500 Lebanese pounds for 23 years, but began depreciating on parallel markets last summer due to unsustainable financial policies that cracked under an acute dollar shortage. The dollar shortage was the result of a decade-long economic slump and a slowdown in remittances from Lebanon’s large diaspora. Suffering from a dollar liquidity issue, banks imposed increasingly harsh capital controls in November. Depositors had only been allowed to withdraw a few hundred dollars per month from dollar-denominated accounts, forcing many to withdraw cash in Lebanese pounds at the official rate, which was substantially less than the market rate and thereby caused them to incur significant losses. The decision also allows people with accounts in local currency under five million Lebanese pounds ($3,330, at the official rate) to convert their money into dollars at the official rate and then withdraw it in Lebanese pounds at the higher parallel rate. For example, a depositor with three million Lebanese pounds in his or her account would be able to convert it to $2,000 and then convert it back to Lebanese pounds at the market rate of 2,800 Lebanese pounds to the US dollar, which would equal 5.6 million Lebanese pounds. This means the account holder will effectively double his money.