Lebanon is adopting a new official exchange rate, devaluing its local currency by nearly 90%. The new rate is set at 15,000 Lebanese pounds against the U.S. dollar, according to a January 31 report, which cited a statement from the country’s central bank governor, Riad Salameh.
This marks a significant shift from the old rate of 1,507 Lebanese pounds per dollar. The official Lebanese currency has been pegged to the dollar at that rate since 1997.
Salameh stated that commercial banks in Lebanon “will see the part of their equity that is in pound decrease” once the new official exchange rate is implemented. He added that to cease the impact of the new development, the banks would be given five years “to reconstitute the losses due to the devaluation.”
Lebanon’s Financial Woes
The Lebanese pound started to devalue in 2019 due to the country’s years-long major economic crisis and the probability that its government will default on maturing national debt obligations.
In a bid to tackle the country’s paralyzing financial crisis, Lebanese banks restricted ordinary citizens from freely accessing their dollar savings, but the move worsened the situation.
The decision to devalue its currency is in line with a draft agreement reached with the International Monetary Fund (IMF) last year that could enable the country to receive a bailout from the organization to tackle its financial crisis. However, the change is not expected to solve one of the most crucial aspects of the situation – limiting citizens from accessing their dollar savings.
Can Bitcoin Fix This?
While the IMF has offered a bailout by forcing the western Asian country into devaluing its official currency to solve its liquidity crisis, bitcoin (BTC) could have offered a better solution by providing some protection for currency devaluation and liquidity. This is what the popular whistleblower and BTC proponent – Edward Snowden – hinted at earlier.
*whispers* bitcoin fixes this pic.twitter.com/wSxQgMnM9m
— Edward Snowden (@Snowden) January 31, 2023
Bitcoin has a limited supply of only 21 million units, with more than 90% of its maximum supply already in circulation. Due to the limited supply, Lebanese do not have to wake up to news such as their government devaluing their BTC.
Moreover, due to its decentralized nature, bitcoin could bring foreign currency to the cash-strapped Lebanese scrambling for alternative banking solutions without going through a financial institution.