October 1, 2026
In light of the stability of the exchange rate of the Lebanese pound at around 89,500 pounds to the dollar for about three years, a fundamental question arises about whether the currency crisis has actually ended, or whether what is happening is nothing more than a freezing of the most prominent symptoms of the collapse.
In this context, banking risk expert, Dr. Muhammad Fahili, confirmed that this stability does not reflect a real economic or monetary recovery, but rather represents “managed stability” during which the continuous decline in the exchange rate was frozen, without any radical treatment of the structural causes behind the crisis.
Fahili explained that this stability is based on three main factors: the transformation of the Lebanese economy into a monetary system that relies on actual foreign exchange, the decline in reliance on bank loans in the pound, in addition to the Bank of Lebanon practically stopping financing the treasury deficit in the local currency, and near stability in the monetary supply in circulation. Although these factors stopped the causes of further collapse, they did not address the financial gap that originally led to the crisis.
Fahili stressed that the Lebanese crisis was never an exchange rate crisis in isolation from its essence, which is a financial and banking solvency crisis. Pointing out that the financial gap has not been completely resolved, and that the losses have not been clearly distributed between the state, the Bank of Lebanon and the banks, in addition to the fact that frozen deposits in foreign currencies remain unavailable to depositors at their real value, describing the current situation as similar to “stabilizing the patient’s temperature without treating the source of the disease.”
Regarding the extent to which the current exchange rate reflects the true value of the lira, Fahili pointed out that Lebanon now has a system of multiple prices according to purpose and use, including the money market price for daily transactions, the customs collection price, and the prices for withdrawing frozen deposits resulting from a series of circulars of the Bank of Lebanon (from 151 to 166), in addition to historical prices. As a result, the lira lost its function as a store of value and unit of account, and was limited to the function of a medium of exchange in light of the shrinking demand for it.
Regarding the 2027 budget, Fahili believed that the exchange rate may not appear as an independent item to unify exchange rates, but it will be present implicitly and indirectly in various financial equations. Such as estimating revenues and expenditures, calculating the purchasing power of salaries, customs collection, and processing obligations in foreign currencies. He also indicated that any expected progress in negotiations with the International Monetary Fund will re-introduce the issue of unifying the exchange rate as a basic condition for addressing the existing distortions.
Fahili concluded by emphasizing that the stability of the figure at 89,500 pounds to the dollar only reflects a change in the nature of pressure on the exchange rate, stressing that achieving real stability requires addressing the financial and banking gap, rebuilding lost confidence, unifying exchange rates, and deciding on a mechanism for distributing losses fairly.
