People seeking to get their money out of Lebanon have resorted to trading in property, watches and jewelry to circumvent exchange controls.
With tight restrictions on withdrawing cash and even tighter controls on the sale of dollars, some people are accepting big losses just to get hold of hard currency.
“I don’t want my dollars in the bank anymore because I don’t trust them. I know I’m losing part of the dollar amount that way but it’s better than losing all of it if the bank shuts down or applies even more restrictive measures,” said Asile who spoke under the condition of anonymity having recently purchased a diamond and gold watch from a shop in Burj Hammoud with the intention of reselling it.
The owner of a jewelry store in Beirut relayed the story of a customer that had bought a Mercedes Benz for $170,000 through a bankers’ check, only to resell it at a $20,000 loss to a dealer in exchange for cash.
This has become a common method to withdraw deposits from banks, as customers use a bankers’ draft instead of cash to purchase an item and then resell it for US dollars – often at a loss.
“Another customer, with a smaller amount of money, told me that he tried to buy a Kia or Hyundai but the dealership was out of models because everyone had been doing so,” said Mazen, the owner, who added he only takes cash payments.
The problem is that few businesses are still accepting bankers’ checks, with real estate as one of the few exceptions. “You cannot transfer your money abroad or take it in cash. Even investing in gold, jewelry or art is no longer feasible since buyers of those are demanding cash and not check. Real estate is one of the only options left for people if they want to get their money out of the banks,” says Walid Moussa, president of the Real Estate Syndicate of Lebanon.
Along with cars, luxury watch sellers are another business that also accept bankers’ checks, with a watch seller in Burj Hammoud confirming that his sales of high end watches have indeed increased and that he takes payments in bankers’ checks. Buying a luxury good in Lebanon for lira and selling it abroad for dollars is another method that has become increasingly common as people seek to get their money out of the country.
Banks have become steadily more restrictive with their cash related policies – especially concerning US dollars. This dynamic has created a vicious cycle as the populace become fearful that they will no longer be able to access their cash and rumors of bankruptcy and failing credit cards run riot. Meanwhile, business owners also need dollars to pay their suppliers.
The root cause behind the country’s ruinous rise in cost of living is the significant increase in the US dollar to Lebanese lira exchange rate. Officially, there is a peg in place at 1,500 liras to the dollar, but the black market rate, the only place where Lebanese can now get dollars, regularly sees rates in excess of 2,000 lira to the dollar due to the critical shortage of dollars in the economy.
As even the most basic needs become more and more expensive, the vast majority of Lebanese employees have incurred significant salary cuts – up to 50 percent in many cases – and many have also lost their jobs (although no exact figures are available).
In order to cope with this dire economic situation, Lebanese of all income levels have changed their spending habits. “I now look at prices in supermarkets and try to only buy food that is cheap and would last long such as rice, beans, potatoes and bread. We eat meat only occasionally nowadays and I’ve taken to buy locally produced sweets for my children because they are much cheaper than the imported ones,” said Souha, a non-working mother of three whose husband has gotten a 40 percent pay cut at his job as a restaurant manager.
Middle to upper class Lebanese have been impacted by the higher cost of living and have downgraded their lifestyle. “My wife and I used to go out around three to four nights per week. Nowadays, we try to have friends over or just spend the evening alone watching Netflix. We go out only on weekends and even then, we have a big dinner at home beforehand and go out for a shisha or drinks to cut costs,” said Najib, a newly wed lawyer.