A closer look into Lebanon’s fixed currency
Lebanon's fixed exchange rate has been a pillar of stability for two decades. However, poor economic conditions threaten its sustainability.
BEIRUT — Lebanon declared an economic emergency Sept. 2 following a downgrade from two of the three major credit rating agencies and slowed GDP growth — 0% according to the credit rating agency Fitch.
These precarious economic conditions have raised concern over the country's ability to maintain one of its most successful monetary policies: the fixed exchange rate between the Lebanese pound and US dollar.
In 1980, the exchange rate was around 3 Lebanese pounds to 1 dollar. In just over a decade, this increased to over 2,500 pounds to 1 dollar. This rapid change in the exchange rate deterred investors.
This economic instability was in large part due to the Lebanese Civil War, which began in 1975. But by the mid-1990s, the conflict was de-escalating and reconstruction was a priority. However, the government struggled to attract investors due to currency inflation. One answer to this was a currency peg, fixing 1,507.5 pounds to 1 dollar by 1997.
