The Momentum of the Presidency and Achieving Financial and Monetary Stability
Since the election of General Joseph Aoun as president of the republic, Lebanon has been experiencing a true celebration and witnessing a throng of well-wishers that has included both the French and Cypriot presidents, in addition to the United Nations secretary-general, as well as Jordan's foreign minister and Spain's defense minister, while the foreign ministers of the Kingdom of Saudi Arabia and the State of Kuwait are expected to arrive. That joy is set to be completed once Prime Minister-designate Nawaf Salam, a judge and ambassador, forms a government that lives up to the ambitions and hopes of the Lebanese, which is bound to bring greater positivity on both the political and economic levels.
These positive developments come after the devastating Israeli aggression against Lebanon, which spared neither stone nor human life, costing Lebanon and the Lebanese a host of leaders and thousands of martyrs and wounded, in addition to the massive destruction inflicted on villages in the south and the Bekaa Valley, as well as Beirut's southern suburbs. Meanwhile, addressing the aftermath of the aggression requires a government whose top priority is restoring the regular functioning of the state and its institutions, without which there is no way to achieve an Israeli withdrawal, rebuild what was destroyed, and address the financial and economic crisis from which Lebanon continues to suffer.
While the Lebanese wait for this national celebration to be reflected in the financial and monetary situation, and to take shape through an improvement in the value of the Lebanese pound against the US dollar, the current exchange rate hovers between 89,300 and 89,700 pounds to the dollar. Notably, this exchange rate does not reflect the true value of the national currency, nor is it the result of a balance between supply and demand for the pound; rather, it is the result of a decision by the monetary authority (Banque du Liban) aimed at stabilizing monetary transactions and economic operations.
The plundering of deposits and the collapse of the banking sector on the one hand, and the procrastination in enacting reform laws and adopting appropriate solutions on the other, have led to a loss of confidence in the national currency and consequently the collapse of the exchange rate. Instead of the caretaker government devising appropriate solutions to the financial crisis and passing a capital controls law and other related legislation, approaches were confined to Banque du Liban circulars, which, despite their importance, were insufficient to curb the repercussions of the financial and economic crisis.
Improving the exchange rate of the national currency, however, requires the fulfillment of a set of economic factors, without which the results of this improvement remain temporary and vulnerable to renewed setback. The most important of these factors can be summed up as revitalizing the productive sectors that constitute the real economy and reflect the country's economic strength. Yet reviving the productive sectors and increasing the productivity of the national economy and the competitiveness of its products requires long-term investments, which in turn first requires security and political stability, followed by reforms to the economic and political system and empowering and fortifying the judiciary.
Furthermore, the exchange rate of the national currency mirrors macroeconomic indicators, particularly the economic growth rate, the inflation rate, and the level of public debt. The higher the economic growth rate and the lower the inflation and public debt ratios, the more the exchange rate improves, and vice versa. Since increasing the growth rate is a long-term process, reducing the inflation rate and curbing public indebtedness contribute more rapidly to improving the exchange rate, as both depend on the success of the incoming government's direct fiscal and monetary policies.
Improving the exchange rate also requires the national economy to encompass diverse economic activities, particularly those whose output is geared toward export, so that the revenues of the national economy are not confined to one sector to the exclusion of others, especially export revenues, which help reduce the balance of payments deficit. Moreover, inflows of foreign direct investment, alongside the return of foreign investors' confidence in the national economy, increase demand for the national currency and consequently lead to an improvement in its exchange rate against foreign currencies.
Nevertheless, the priority in the coming period must be maintaining exchange rate stability rather than achieving an appreciation in it, which calls for working to stabilize fiscal and monetary policies, particularly rationalizing public spending and prudently managing the money supply. That is because any appreciation in the exchange rate would have repercussions for state expenditures and obligations, especially servicing public debt in foreign currencies, in addition to its repercussions for public sector and military salaries paid in US dollars on the one hand, and other repercussions for state revenues on the other.
On the other hand, the first positive economic indicators have emerged with a marked improvement in monetary conditions, as Banque du Liban's foreign currency reserves have risen by $300 million since the election of the president of the republic, as confirmed by Banque du Liban Acting Governor Dr. Wassim Mansouri. Meanwhile, the central bank continues to maintain monetary stability in general and the stability of the pound's exchange rate in particular, aligning with the president's approach to preserving depositors' funds while undertaking a comprehensive study to formulate an appropriate solution.
The positive indicators noted above come as a natural outcome of General Joseph Aoun assuming the presidency, having performed his duties during his command of the army with high professionalism that spared Lebanon numerous dangers. Following his inaugural address, which included a roadmap for Lebanon's recovery from its economic slump, this positivity is no longer merely a matter of financial or monetary indicators, but has become a surge of momentum bound to help pull the Lebanese crisis out of the bottleneck in which it has been mired for more than five years.
Bringing this positive momentum to its desired conclusions, particularly resolving the financial and economic crisis, requires forming a government of competent professionals capable of carrying out reform to rescue Lebanon from its slump, a government that elevates it to the ranks of developed countries. What is needed is a government fiercely protective of depositors' funds that restores confidence in the various economic sectors, especially the banking sector, as restoring confidence is enough to bring back both domestic and foreign investments. It must be a government capable of restoring the authority of the state, enabling institutions once again to perform their duties and fulfill their responsibilities in defending the homeland and undertaking reconstruction.
Our homeland has endured enough dereliction and inaction; the time has come to stop squandering opportunities, and the time for action has arrived.
Translated from Arabic with AI. Read it in Arabic