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March 4th 2005

Crisis in Lebanon could affect currency

Lebanese bankers are starting to worry that the nation’s spreading political crisis will affect the value of its currency. Political instability has racked Lebanon for several decades, and with the resignation of its current administration, the situation is likely to get worse before it gets better. Each time there is a crisis, many Lebanese citizens move to convert their savings into dollars as quick as possible. Such is the case now. Lebanon’s central bank has pledged to maintain full convertibility, but it is quick to acknowledge it cannot create a liquid market for Lebanese dollars forever. Its USD reserves have fallen by almost 20% in the last week. If a new government is not formed soon, the country could witness a run on its currency which would irrevocably destabilize its economy. The Financial Times reports:

"It’s not a monetary problem, it’s a political problem," said a finance official on Thursday. "Economic sectors are urging politicians to come up with a solution [as fast as] possible. The more the crisis lasts, the longer the pressure."

Read More: Bankers urge swift end to Lebanon crisis

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Posted by Adam Kritzer | in Exotic Currencies | No Comments »

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