Hundreds protested for a second night over the Lebanese authorities' handling of a deepening economic crisis, despite the government pledging on Friday to inject dollars into the market to bolster its sagging currency.
In one incident in the northern city of Tripoli, the army dispersed hundreds shouting "revolution, revolution." Demonstrators threw stones and Molotov cocktails onto the soldiers and damaged the facades of several banks and shops. Soldiers responded with tear gas.
After a crisis meeting on Friday, President Michel Aoun announced that the central bank would implement measures from Monday including "feeding dollars into the market," in a bid to support the Lebanese pound.
It's reported that the Lebanese pound had tumbled to an exchange rate of 6,000 per dollar on the black market early on Friday, compared to the official peg of 1,507 in place since 1997.
Protesters had initially taken to the streets after sundown on Thursday, railing against the spiraling cost of living and the government's apparent impotence in the face of the worst economic turmoil since the 1975-1990 civil war.
They had also rallied against the governor of the central bank, Riad Salame, whom protesters accused of having encouraged state borrowing over the decades that they say benefited only the banking and political elite. Experts say the cabinet would like to see Salame removed from the position he has held since 1993.
A man cleans up broken window glass outside a bank vandalized by protesters in Lebanon's northern city of Tripoli. /AFP
What triggered the pound plunging?
Lebanon's economic crisis has been brewing for years. The country, with large groups of refugees from Syria and Palestine, had long suffered from civil conflicts and has been affected by the wars afflicting its neighbor countries. Lebanon has relied heavily on debt to pay its bills, while its weak government is incompetent to carry out reforms to bolster its economy.
The country has a sovereign debt of more than 170 percent of its GDP, and it went into default in March.
The crisis emerged last year when banks began limiting withdrawals, which immediately triggered anti-government protests across the country. Experts explained that the withdrawal limitation is the result of a nationwide shortage of dollars, because foreign inflows have fallen sharply in recent years along with economic growth.
The primary source of dollars for the country comes from wealthy foreign investors in the central bank as the country's poor industry system produces nothing to export.
The Lebanese pound has been pegged to the dollar since 1997. Banks in the country have long been offered high interest rates for large deposits, and the yields of investors are covered by newer investors with even higher rates, which analysts have likened to a state-sponsored Ponzi scheme. In the case where there are no new investors, the system won't be able to keep running and will eventually collapse.
That shortage of dollars, which pushed the government to impose strict dollar withdrawals (100 U.S. dollars a week), largely devalued Lebanese pounds and made the country's import-dependent supply chain slow to a crawl, which then triggered essential goods prices to soar, largely downgrading people's living standard.
Businesses in Lebanon have been shutting up at a rapid rate. /Reuters
The woe of middle class and poor
In May, Lebanon witnessed its first protests caused by hunger.
According to Prime Minister Hassan Diab, many Lebanese have already stopped buying meat, fruits and vegetables, and many will soon find it difficult to even afford bread. The price of meat, for example, has doubled since March, with ground beef now running at about nine U.S. dollars a pound.
"Everything is so expensive. Everything is just beyond expensive," said Um Ahmed, 45 said. "People have put up with so much already."
With few clients having the capacity to pay and the dollars to buy imports drying up, businesses in the country have been shutting at a rapid rate. According to a survey in February, more than 220,000 jobs in the private sector have been shed since mid-October when protests fueled by worsening economic conditions erupted against the political elite. Official data shows unemployment has soared to 35 percent nationwide.
Before the crisis, Lebanese middle class could afford nice clothes, occasional trips abroad and low-paid maids from African countries or South Asian countries. But the crisis has caused many to struggle to pay for food and other essentials.
Mirna Haddad is a 54-year-old accountant, and her salary in Lebanon usually was modest, allowing her to buy a car or take occasional family trips to Greece. But now, with her salary no longer having the value as it used to have, she can't transfer it to her son who studies in a French university.
The pain for average citizens is everywhere.
"The economic situation has further deteriorated... The middle class has been obliterated," said Hilal Khashan, a professor at the American University of Beirut.
To avoid currency bankruptcy, the country began to talk with the International Monetary Fund last month, seeking a multi-billion-dollar bailout. The dialogue is ongoing.
Garbis Iradian, chief economist for MENA at the Institute of International Finance (IIF) told Euromoney magazine that with IMF support, and the implementation of crucial fiscal and structural reforms, the parallel exchange rate could appreciate close to an equilibrium rate of around 3,000 Lebanese pounds to the dollar.
(With input from agencies)