Lebanon to ditch Sayrafa currency exchange platform

Reuters/Aziz Taher

• Bloomberg system to be adopted
• Move hailed as ‘a step forward’
• Precondition for IMF loan

Lebanon’s cabinet has approved the replacement of the controversial Sayrafa currency exchange platform with a new one run through the Bloomberg trading system. 

Caretaker Information Minister Ziad Makari gave no indication of a time frame for the replacement when he spoke to reporters this week, saying only that the new platform would come into effect “when the resolution is resolved” and published in the official gazette.

The Sayrafa platform was established in May 2021 to combat currency speculation by taking lira liquidity out of circulation. The platform sells US dollars for less than the parallel market rate, often at a discount of over 20 percent. 

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The platform has come under sustained criticism from international and Lebanese financial institutions for its high costs to Banque du Liban (BDL) – the Lebanese central bank – and its lack of transparency. 

The World Bank called the platform a “weak and inefficient monetary tool” in its spring 2023 economic monitor.

The bank also said that some $2.5 billion worth of arbitrage profits had been made from buying cheap dollars on the Sayrafa platform at BDL’s expense.

The news of Sayrafa’s closure was welcomed by financial experts in Lebanon. “It is a step forward,” said Ali Bolbol, head of economic research at Blominvest Bank, who said that the new platform “will be transparent, as only financial institutions and licensed exchange companies are permitted to do transactions on it”. 

Little is yet known about how the new Bloomberg platform will operate. The director of research at the Association of Banks in Lebanon, Elias El Achkar, said that the BDL has not explained to commercial banks how the new system will work.

“We don’t have enough information on this platform to judge if it’s going to be better than Sayrafa,” he said.

The lack of clarity over how the new platform will be implemented has led to disagreement regarding what effect it will have on exchange rates.

Bolbol said the decision “will help unify the exchange rate, as there will be just two rates: the market Bloomberg rate and the official rate.” 

Bank Audi head of research Marwan Barakat expects the parallel market to remain “vigorous” under the current operating environment.

The consolidation of Lebanon’s exchange rates and progression towards a single, flexible rate has been a major precondition of an International Monetary Fund loan.

The platform exchange is the first major BDL initiative to be introduced following the departure of its embattled governor Riad Salameh on July 31.

Salameh, who was the world’s longest-serving central bank governor when he stepped down, faces an Interpol red notice for charges that include corruption, forgery, money laundering and embezzlement.

He is under US, UK and Canadian sanctions for overseeing what critics have likened to a “Ponzi scheme” at BDL during his 30-year tenure.