Al-Sisi reviews Egypt's food security, strategic commodity reserves    Egypt signs strategic agreements to attract global investment in gold, mineral exploration    Syria says it will defend its territory after Israeli strikes in Suwayda    Egyptian Exchange ends mixed on July 15    Suez Canal vehicle carrier traffic set to rebound by 20% in H2: SCA chief    Tut Group launches its operations in Egyptian market for exporting Egyptian products    China's urban jobless rate eases in June '25    Egypt's Health Minister reviews drug authority cooperation with WHO    Egypt urges EU support for Gaza ceasefire, reconstruction at Brussels talks    Pakistan names Qatari royal as brand ambassador after 'Killer Mountain' climb    Health Ministry denies claims of meningitis-related deaths among siblings    Egypt, Mexico explore joint action on environment, sustainability    Egypt, Mexico discuss environmental cooperation, combating desertification    Needle-spiking attacks in France prompt government warning, public fear    Foreign, housing ministers discuss Egypt's role in African development push    Korea Culture Week in Egypt to blend K-Pop with traditional arts    Egypt, France FMs review Gaza ceasefire efforts, reconstruction    CIB finances Giza Pyramids Sound and Light Show redevelopment with EGP 963m loan    Greco-Roman tombs with hieroglyphic inscriptions discovered in Aswan    Egypt reveals heritage e-training portal    Three ancient rock-cut tombs discovered in Aswan    Egypt condemns deadly terrorist attack in Niger        Sisi launches new support initiative for families of war, terrorism victims    Egypt's GAH, Spain's Konecta discuss digital health partnership    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Egypt's Irrigation Minister urges scientific cooperation to tackle water scarcity    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    Egypt's Democratic Generation Party Evaluates 84 Candidates Ahead of Parliamentary Vote    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Cabinet approves establishment of national medical tourism council to boost healthcare sector    Egypt's PM follows up on Julius Nyerere dam project in Tanzania    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Fitch says changing Lebanon's dollar peg painful but benefits possible
Published in Amwal Al Ghad on 02 - 11 - 2019

Changing Lebanon's currency peg to the U.S. dollar would be a painful move that would witness the country's pound weaken sharply, ratings agency Fitch's Director of Sovereigns, Toby Iles said on Friday. However, the move could also reap long-term benefits, Iles added.
The 22-year-old currency peg has come under growing scrutiny as the country grapples with its worst economic crisis in decades amid widespread protests that toppled the coalition government of Saad al-Hariri.
"If you were to change the peg, it amounts to a repricing of the Lebanese economy …and given the imbalances that one sees in Lebanon, such as the current account deficit, it would result in a much weaker currency," Iles told Reuters.
"The near-term costs of coming off the peg would be painful, even if an adjustment could bring long-term benefits."
A number of countries have unshackled currencies in recent years to allow economies to adjust to large current account deficits and other imbalances.
The central bank has repeatedly ruled out a break in the peg which fixes the pound at 1,507.5 to the dollar. But with black market exchange rates indicating a discount of more than 20% in recent days, observers say a double-digit devaluation has become increasingly likely.
The possible imposition of capital controls as banks reopened on Friday following a two-week closure posed a "big question", Iles said.
"Even if it could help stem outflows in the near term, Lebanon needs inflows, and failure to get the inflows would mean a huge readjustment of the economy in a very short period of time, and a massive recession," he added. "And how would that play into political dynamics?"
The central bank promised not to introduce controls when banks re-opened. While no formal curbs were imposed, banks told customers they could not transfer funds abroad unless for specific reasons such as education, health or family support.
Customers also faced limits on U.S. dollar account withdrawals.
With 75 percent of deposits denominated in dollars, possible large withdrawals could hit FX reserves as banks face a big mismatch in FX liabilities, or short-term deposits, and FX assets, or dollars parked at the central bank which – apart from reserve requirements – had longer maturities, said Iles.
"Would it allow banks to access their U.S. dollar deposits at the central bank ahead of maturity to make dollars available? If it did that, then any bank run on U.S. dollar deposits would feed through on lower FX reserves, and that would be kind of a self-reinforcing cycle."
Source: Reuters


Clic here to read the story from its source.