What is the truth about the dollar’s decline before the presidential election session?

Grace Al-Habr wrote in the electronic newspaper Al-Anbaa, “After the beginning of the stabilization of the exchange rate of the lira, this concern returned to preoccupy the Lebanese, after talking about a change in the exchange rate, and the possibility of a decline in the value of the dollar to record numbers, and linking this to the approaching election of a president of the republic in the scheduled parliamentary session.” It will be held on the ninth of January.

Al-Habr continued,

This belief was reinforced by the offers made by some banks to customers to freeze accounts in pounds over a period of 3, 6, 9 months or a year in exchange for interest ranging between 30 and 45%, depending on the size of the deposit and the time period for freezing the deposited amount.

First, “what determines the exchange rate is supply and demand in the market, both of which are linked to the size of the monetary mass pumped by the Bank of Lebanon, especially since it is the deciding factor in the medium and long term,” according to what Karabid Fekrajian, a researcher at the Lebanese Institute for Market Studies, explains.

The exchange rate is not determined by a presidential entitlement or any other entitlement, according to Fekrajian, and controlling the monetary supply keeps the exchange rate constant, noting that during the Israeli war on Lebanon we went through a phase of security tension, and the exchange rate was not affected and the lira and the dollar were dealt with without any effect.

In details, Fekrajian says that the monetary supply increased from November 30, 2024, to December 15, 2024, by 12.03%, expressing his fear of any additional growth in the monetary supply, and warning that we will then be faced with the fear of a collapse in the lira’s exchange rate, as he put it.

In addition, Fekrajian does not see any indicators leading to an improvement in the exchange rate, and he considers that establishing measures to control the exchange rate would be a positive option, stressing that looking to reduce the exchange rate would not be a sound approach.

In this regard, Fekrajian explains that any reduction in the exchange rate or support for the lira after the collapse is not something desirable, on the contrary, unless this happens due to supply and demand variables in the market, or the adoption of a floating exchange rate, which is not approved and applied in Lebanon. We still follow the policy of the Bank of Lebanon’s intervention in the market.”

He believes that any intervention by the Central Bank will not provide a sustainable solution or a good treatment path, recalling what happened before the last parliamentary elections, when the Bank of Lebanon intervened, and this did not lead to a stabilization of the exchange rate, as it returned and rose after its decline.

Fekrajian urges the Bank of Lebanon, the government, and the House of Representatives to adopt a sound monetary policy, “either by stabilizing the size of the monetary mass through legislation from the Parliament, for example, at what it currently is, which amounts to 55.81 trillion pounds, or following comprehensive “dollarization” or going… To the Monetary Council option,” stressing that “any other options will be circumstantial and patchwork policies, and we will push the crisis forward, leading to its deepening in the future.”

In conclusion, the periods of instability that the Lebanese experienced as a result of manipulation or changes in the exchange rate, which caused many losses in their businesses and bank savings, prompt them to ask those concerned about the future of the monetary and financial reality so that history does not repeat itself!