Beirut: Consumers walking down major commercial streets in Beirut would definitely not miss the increase in the number of shops put up for sale/rent or retailers announcing steep discounts.
As Lebanon’s economic crises deepens amidst nonstop protests that have stifled the country’s political - as much as the economic - cycle, small and mid-sized businesses are feeling the pinch. Markets, businesses, eateries, leisure parks, hotels and the whole tourism industry should have been gearing up for Christmas and New Year during these weeks.
Instead, this year, things feel differently amidst an ongoing financial crunch that has not only crippled business owners, but also led to closures, layoffs and salary cuts. In busy areas such as Hamra, Mar Elias, Barbour, Downtown, Jounieh, Zouq Musbeh, and many others, there are many signs of an economic drought.
Mohammad, a cashier at a shawarma place, lost his job in October after the owner closed the eatery which had opened in May. Gabi T., a clothing store’s owner, put up his shop up for sale last December. However, as the crisis worsened he was forced to announce a 75 per cent discount.
What is hitting business hard is lack of cash. The Lebanese pound has been pegged to US dollar for decades. The official rate for $1 to the Lebanese pound [LBP] is 1,500-1,515.
The Lebanese have long used the American currency alongside the local pound for all sorts of expenses. For over three months now, banks have limited withdrawals of the dollar at counters and ATMs.
Bank clients, whose’s accounts are in dollar, were permitted to withdraw unlimited amounts over the counters until limits were enforced in July and August. Even cash withdrawals of foreign currency have been limited. Between September and October, ATMs stopped and/or limited dispensing foreign currency.
As the uprising started on October 17 and banks shut down for nearly 15 days, ATMs emptied of US dollars. Once the crisis deepened and financial woes started biting residents’ budgets, sources estimate $2 billion had been withdrawn in cash from banks and kept at homes.
The Lebanese Central Bank recently set restrictions banning transfer of dollars abroad. Bank clients were banned from withdrawing more than $1,000 per week, but not all banks abided as some limited the withdrawals to $300 per week.
Money exchange houses have played a very important role in the spiking the dollar’s value in the market, making it fluctuate between LBP1,600 and LBP2,000 although the official price is LBP1,500.
A business owner, Abed Mohammad, said all Lebanon’s private sector is heavily dependent on imports.
“Banks are refusing to make transfers to import goods and materials unless you bring fresh cash (banknotes or foreign transfer). In case of banknotes, businesses need to bring US dollars to pay the banks. So, companies have to buy dollars for 30 per cent higher.
“This will lead to a shortage of goods in the market and an increase in prices.”
Cmpanies will also not be able to pay salaries in full, said Mohammad, who noticed that some are already paying half salaries. “Others won’t be able to pay salaries and even those, who are still paying, they will not last long. I see lots of companies going out of business and mass unemployment,” he said.
Another business owner Mustafa Itani said he has seen prices rise sharply. “Prices rose around 20-25 per cent. Sales have dropped by nearly 80 per cent. Companies started refusing to take cash, checks and post-dated checks as they want cash money because banks have made strict rules on withdrawals and telegraphic transfers outside Lebanon,” he said.
According to Itani, many companies started paying half salaries and are functioning three days a week.
“Many companies are starting to lay off employees. If no measures are taken, a lot of companies will shut down before the end of 2019,” Itani said.
Industrialist Wissam Shehadeh said manufacturers have been suffering since the dollar shortage surfaced several months ago.
“This has been happening since the beginning of the year due to the faulty economic strategies we have. Protests have only come to expose the crisis’ seriousness. No bank transfers are allowed, so we cannot import materials.
“The Ministry of Economy banned increase in prices of goods and also banned dealings at a rate higher than LBP1,500 against each dollar. We import our materials in dollars, but local banks are refusing give us credit facilities in dollars and only in LBP as per the new restrictions.
“We are being forced to buy dollars from money exchange houses at high rates of LBP1,900-2,000 to import goods in dollar.”
Wael H., a hypermarket’s finance manager at Mar Elias, said: “So far we have only increased the prices of goods imported in dollars. All local items are being sold at the same price - however some local manufacturers who import part of their materials in dollar have been forced to increase and we did the same.”