Dollarization: Businesses price in dollars as LBP swings around 80,000

In less than a week the Lebanese pound's value against the dollar has plummeted to a new low from 66,000 to 80,000 at the black market rate, the exchange rate used for buying and selling most goods and services in the country. There are several mobile exchange rate applications that have been the reference for the black market rate for years.

Though the country’s pegged exchange rate against the dollar was officially devalued to 15,000 earlier this month, the black market rate has reflected a more realistic market rate for years, but rapidly fluctuates with no transparency.

The value of the Lebanese pound, at times swinging in value several times daily, has led to businesses pricing their items in dollars, where customers pay in the local currency based on black market rates. Other businesses have started charging their goods and services in hard U.S. currency. Economists and residents fear Lebanon might move towards the latter, which they call dollarization.

Caretaker Economy Minister Amin Salam announced Friday a new pricing mechanism for grocery stores, where goods will be priced in dollars based on what he described as a “modest” interpretation of the black market rate.

Lebanese authorities for years have failed to curtail the black market’s hold on the currency’s value, even as they have attempted to shut down informal exchange rate websites and mobile applications.

Last month, Lebanon's chief prosecutor called for security agencies to crack down on illegal exchangers. A legal official told The Associated Press that the financial prosecutor prepared a list of dozens of black market money exchangers for the security agencies to pursue. However, after the list was leaked, the exchangers laundered their money or left the country, said the official, speaking on the condition of anonymity because they were not cleared to speak to the press.

Some exchangers turned themselves in, but were soon released given that their currency holdings were no longer in the country, the official added, while security agencies raided exchangers who ran small shops and only had “modest” sums of money.

Lebanon's economic crisis has left many struggling to make ends meet in a country where poverty rates have reached 80 percent of the population, according to the United Nations.

The pound's plunge has triggered a wave of price hikes including on fuel, food items and other basic goods.

Lebanon is being run by a caretaker government and is also without a president, as lawmakers have repeatedly failed to elect a successor to Michel Aoun, whose mandate expired at the end of October.