Lebanese currency hits new low after vote, crisis deepens

BEIRUT (AP) — Lebanon’s currency hit a new low on Tuesday as deep divisions in the newly elected parliament raised fears that political paralysis could further exacerbate one of the worst economic collapses in history.

The legislature elected on May 15 showed no clear majority for any group and a fragmented and polarized parliament split between pro and anti-Hezbollah lawmakers. The parties will likely struggle to work together to form a new government and implement desperately needed reforms.

Among those elected to the 128-member parliament were 13 independents. They took part in the protest movement against Lebanon’s entrenched political class, responsible for the crisis rooted in decades of corruption and mismanagement.

It creates a potential showdown in parliament between the two sides, raising concerns about a prolonged stalemate to form a desperately needed new Cabinet to resume talks with the International Monetary Fund over a bailout package.

As of Tuesday afternoon, the dollar was selling at 34,000 pounds on the black market, surpassing the 33,000 pounds to the dollar recorded in January. The Lebanese currency was pegged at 1,500 pounds to the dollar for 22 years until the crisis erupted in October 2019.

Since then, more than 80% of the population has plunged into poverty, suffering severe shortages of electricity, medicine and other basic necessities as central bank reserves dry up. The crisis also triggered the largest wave of emigration since the 1975-90 civil war.

On Friday, Lebanon’s outgoing government approved a stimulus package to pull the Middle Eastern nation out of its economic meltdown. The development came during the last official Cabinet meeting before it became a caretaker government after the elections. The plan is a key IMF requirement.

Outgoing Prime Minister Najib Mikati told reporters last week that the plan aims to protect small depositors while plans to protect large depositors will be negotiated with the IMF. He didn’t provide any numbers, but had said in the past that small depositors are those with $100,000 or less.

On Tuesday, the Association of Banks in Lebanon slammed the government’s plan, saying it would make depositors pay more than $70 billion in wasted public money.

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