Lebanon’s money changers close doors in fear of government raids

▶ Confusion reigns as authorities make arrests after pound rate is officially devalued for the first time in 25 years

The money changers on Beirut’s busy Damascus Street are usually full of customers swapping sought-after dollars for the embattled Lebanese pound.

But on Thursday, the street in Lebanon’s capital was unusually quiet, with the doors to most of the currency shops shut.

On Wednesday, the police arrested two people in the city of Baalbek, after a raid on an unlicensed operation for “practising illegal money-exchange operations”, the state-run National News Agency reported.

Fears of a new wave of government reprisals led most of Damascus Street’s operators to close, said one of the few traders still open on Thursday.

“Most money changers are closed today because they are scared of police raids and being thrown in jail,” he said. “I don’t even know what is happening and if the threat is real.”

Lebanon’s currency has lost 97 per cent of its value since an economic downturn turned into a crisis in 2019.

The official rate was devalued for the first time in 25 years on Wednesday to 15,000 Lebanese pounds to the dollar.

Authorities have repeatedly blamed money changers for the wildly fluctuating value of the pound as the economic crisis has deepened.

Central bank chief Riad Salameh in December blamed “speculation and smuggling” at Lebanon’s borders for the surging inflation rate, which hit 189.4 per cent in the 11 months to October last year. Money changers and their cash counters have become a central plank of Lebanon’s daily life, as one of the only ways to obtain US dollars or to swap the hardwon greenback for pounds.

They form the so-called black market – or parallel market.

Unlike official rates fixed by the central bank, the price at the exchanges – hovering around 63,000 Lebanese pounds against the US dollar on Thursday – is the most representative of the actual value of the currency.

But there have been repeated crackdowns on cash exchanges. At the onset of the crisis in 2019, financial authorities arrested Mahmoud Mrad, head of the Syndicate of Money Changers, on charges of “playing with the market”.

The state-run telecoms operator banned several widely used websites that show live parallel-market rates.

As the currency fell to unprecedented lows against the dollar in recent weeks, changers are being targeted on the grounds that they are again speculating and driving up inflation.

Such is the chaos that on the parallel market, even money changers are confused.

So far, OMT and BOB Finance – the two main exchange houses with hundreds of outlets around Lebanon that work directly with the central bank – have not been affected.

As rumours of more action against exchanges spread this week, there were also reports that the central bank had withdrawn OMT’s licence. With between 15 and 30 per cent of Lebanese households relying on remittances from abroad to survive – totalling $6.6bn in 2021 – OMT is often busy.

One OMT agent in Beirut said reports they had lost their licence were “fake news”.

For the hundreds of smaller operators that have sprung up to provide the vital service, some regulated and others not licensed at all, it’s not clear what is happening.

Experts said accusing changers of gambling on the value of the pound was only an attempt to make them scapegoats for soaring inflation.

“The speculation on the rate is only a consequence of the multiple exchange rates,” said one financial executive.

As well as Lebanon’s new official exchange rate of 15,000 and the parallel rate on the street of close to 65,000, there is also the Sayrafa rate, an official platform managed by the central bank trading at 38,000.

Experts say the speculation on the nation’s currency is only a consequence of the multiple exchange rates