Leave it to the BDL geniuses to figure out new ways to screw us over while pretending to “facilitate” cash withdrawals for people. It took me a couple of hours today to understand the latest circular they issued, and it translates to the following:

– The memo concerns approximately 1.6 million account holders in Lebanon having less than LL5,000,000 Or $3,000 in their accounts.
– Those who have more than $3,000 will still be forced to withdraw $200 weekly or bi-weekly for now.
– “Getting rid” of these accounts will ease pressure on the banks and branches.
– We will now have four rates for the Lebanese Lira
1- Official Rate 1,515 LBP
2- Exchange Currency Offices Rate 2,000 LBP (For Buying only)
3- Currency Offices Black Market Exchange Rate – almost at 2,9000 LBP now.
4- Banks Black Market Exchange Rate – No one knows how they will set the rate (BDL even formed a committee for that).

Why four rates? Here’s how the withdrawals will work:

If a customer has 5 Million Lebanese Liras in his/her Bank account:
1- The bank will convert his/her money to dollars at the official rate, which is 1,515.
2- The bank will then convert back the $3,300 to LBP at 2,800 for instance (Market price of exchange offices, not the official 1,515) which makes it around LBP 9,245,000
3- The Bank will give him/her LBP 9,245,000 in cash.
4- In case the customer has loans to pay, the payment will be deducted from the amount he is allowed to withdraw.

If a customer has $3,000 in his/her Bank account:
The client gets $3,000 at the counter value of LBP at market exchange offices rates which is for instance $3,000 at 2,800 today. BDL will cover up the difference in conversion amounts to the bank in that case.

What if you have more than LBP 5 Million or $3000? Well if you happen to have 5,000,001 in your account, that means you’re technically poorer than the guy who has 5,000,000, at least until other memos are issued.

There are three major problems with this circular:
1- It is imposing an illegal and unfair haircut on depositors having more than $3,000 in their accounts.
2- The Lira rate will go through the roof in the coming weeks as “small” depositors withdraw their money.
3- It will cause further inflation and reduce even more the purchasing power of Lebanese. The LBP 9,245,000 that you withdrew at 2,800 will be worth less the next day if all concerned account holders rush to withdraw their money.