Lebanese Financial Prosecutor Is Suing Currency Exchange Houses

After the Lebanese currency reached its lowest point on February 17th, there have been some legal moves to try and prosecute the exchange houses responsible for contributing to the devaluation of the currency.

Financial Prosecutor, Judge Ali Ibrahim sued 18 exchange houses for violating the law regulating the sector and “harming the stateโ€™s financial standing.” He then referred the files to “the investigative judges of the governorates.”

In January, there was a deal between the Central Bank and the exchange houses to set the exchange rate of the currency at 2,000LL per dollar.

However, some of the exchange houses continued to sell dollars at higher rates, reaching about 2,525LL on February 17th.

It’s important to note that according to statistics on the Central Bank’s website, prior to 2019-2020, the lowest point of the Lebanese currency exchange rate was in September 1992 when it was 2527.75LL per dollar. This was prior to the pegging of the dollar to 1507.5LL in December 1997.

As the financial crisis gets worse and the supply of dollars starts to run out, many exchange houses have decided to run a black market, which has significantly contributed to the devaluation of the currency.

However, in an interview with the Saudi newspaper Ashraq al-Awsat on January 12th, the head of the Syndicate of Exchange Offices, Mahmoud Murad, said: “Money exchange offices are not responsible for the rise in the exchange rate, as the profit margin for them has not changed.”

He also added that there are only 305 exchange houses that are affiliated with the syndicate while there are between 200 and 300 that are operating without a license.

The Central Bank is also said to be partially responsible for the rise of this black market because forcefully trying to fix the exchange rates will inevitably result in the emergence of the black market, according to Financial and Economic expert, Dr. Charbel Qordahi.

โ€œStabilizing the exchange rate can only be done by securing the necessary liquidity in dollars,โ€ he added.

There are fears that, if the government along with the Central Bank don’t find a way to secure the necessary liquidity, the currency will eventually reach 3,000LL, which is double the official exchange rate set by the Central Bank.