Financial Meltdown Throws Lebanese into Frantic Search of Dollars

Initially the lines snaked around the block and then they swelled to fill the whole street, before they turned into a raucous mob of men shoving to the front of the line. There at the exchange bureau, they could buy rationed dollars, the hottest commodity in Lebanon.

The financial meltdown of the small Mediterranean country has thrown Lebanese into a frantic search for dollars as their local currency's value evaporates. Every transaction, from doctor fees to store purchases to rent, is negotiated day by day, juggling the tumbling Lebanese pound and multiple, changing dollar exchange rates. Those who can are snapping up luxury goods or real estate, trying to use their dollars trapped in bank accounts frozen by the cash-strapped authorities.

The turmoil is deepening resentment of the political elite and the once flourishing banking system — and fueling desperation. Recently, a 61-year-old man apparently distraught over his economic situation shot and killed himself on a Beirut commercial street, one of multiple suicides during the crisis. During the 15-year civil war and Israel’s invasion and occupation of the south and Beirut, there may have been queues for water or bread, but Lebanon was always flush with dollars. Since 1997, the local currency, the pound, was pegged at around 1,500 to the dollar, and Lebanese used the two interchangeably.

This kind of stability was built on what experts say was essentially a Ponzi scheme that let banks and the elite profit while allowing Lebanese to live beyond their means. Most of those deposits were from Lebanese expats attracted by high interest rates.

It collapsed when remittances and direct foreign investments plunged in recent years. In the ensuing liquidity crunch, the pound has lost nearly 85% of its value. Tens of thousands have fallen into poverty, wages are worth only a fraction of what they once were, and prices are skyrocketing — stripping Lebanon of its trademark joie de vivre and vibrancy.

Chain retailers have shut down, unable to import or price goods with the fluctuating rates. Some vendors have either closed or only take payment in dollars. Dollar accounts have been frozen, and those trapped dollars have become ‘Monopoly money’ with no value outside Lebanon, said Dan Azzi, a former banker and analyst. He coined a name for that currency, the ‘Lollar’ or Lebanese dollar.