Amid the deep economic and financial turmoil, Lebanon on Tuesday witnessed unprecedented banking chaos in the country turmoil in view of the US Caesar Act (Caesar Syrian Civilian Protection Act of 2019) coming into effect.
Passed by the US Senate in December 2019, the Caesar Act came into force on June 17, giving the US President power to impose sanctions on the Syrian regime and its allies. The act aims to pressurize Syrian President Bashar Al-Assad and his affiliates to put an end to the destructive civil war going on for more than nine years.
In light of the ongoing situation, Lebanon’s Central Bank is striving to limit the purchase of Dollar in the country aiming at transferring it to Syria.
Lebanon’s banking system has been assisting the Syrian economy for decades now. However, since the past several months, Lebanon has been facing a banking and financial crisis due to shortage of dollars and imposition of draconian capital controls by its Central Bank.
Significantly, a day ahead of the Caesar Act coming into place, the Lebanese population rushed to buy the dollar after Money Exchange Syndicate set the rate at LBP3,900 pounds for one dollar. In a bid to tackle the freefall of Lebanese pound and offer temporary relief, the country’s central bank injected fresh dollars worth approximately $6 million a day from its reserves into the financial market.
Meanwhile, head of the Lebanese movement Hezbollah Hassan Nasrallah issued a statement on Tuesday accusing the United States of using sanctions under the Caesar Act, against the Syrian government, to starve Lebanon. He went on to urge the Lebanese government to “not to submit” to the Caesar Act.
Cash-strapped Lebanon is significantly in a difficult situation while responding to the new sanctions law. Lebanese Foreign Minister Nassif Hitti maintained that the new legislation does not target the country, but he asserted that there will be repercussions and will further deteriorate the already-troubled economy.
At the same time, the Lebanese government has been facing the anger of hundreds of demonstrators protesting against the Hassan Diab administration’s incompetency in handling the worst economic chaos that the country is facing.
From rapid devaluation of Lebanese pound to increasing cost of living, these unparalleled consequences of economic and financial crises in Lebanon are emerging to be major challenges for the government. With a sovereign debt of over 179% of its GDP, Lebanon has become one of the most indebted countries in the world., with a sovereign debt of more than 170% of GDP – went into default in March. Unemployment has soared to 35% nationwide.
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