Banque du Liban (BdL), Lebanon’s central bank, issued a circular this week calling for all money transfer offices (such as Western Union) to only pay out cash in Lebanese Pounds (LBP) rather than US dollars, even if the transfer was made in the US currency. This is the latest, and to date most worrying, sign of Lebanon’s deteriorating currency situation. The Lebanese currency’s long-standing peg to the US dollar (LBP 1,507 = $1) is under threat.

BdL Governor Riad Salameh seldom misses an opportunity to try to assure investors that the peg isn’t under threat, but the financial engineering needed to maintain it is increasingly obvious (MEES, 21 December 2018). Details on how exactly BdL will enforce the ruling are sparse, but presumably the dollars will be used to bolster the government forex holdings that are crucial to propping up the peg. (CONTINUED - 141 WORDS)