Lebanese lira ranks as the world's weakest currency amid deepening economic crisis — What's driving its decline?
Leading the world's weakest currencies, the Lebanese lira today ranks first in the Arab world and globally as the weakest currency, according to the Wise platform's classification.
Regionally, it is followed by other depreciating currencies, including the Syrian pound, Iraqi dinar, Sudanese pound, and Yemeni rial.
Globally, the Lebanese lira has even performed worse than the Iranian rial and is weaker than currencies from countries such as Vietnam, Sierra Leone, Laos, Indonesia, Uzbekistan, Guinea, and Paraguay.
Every weak currency reflects a weaker economy. In Lebanon, several factors contribute to the weakness of the Lebanese lira.
First, interventions by the Central Bank of Lebanon—printing more pounds and injecting money into the market without adequate coverage—have lowered its value. The currency quickly loses value when there are too many pounds in circulation and no corresponding production or reserves.
Second, Lebanon imports more than 80% of its goods, meaning traders constantly need U.S. dollars. Since demand for dollars exceeds supply, the value of the Lebanese lira drops.
Third, inflation has surged uncontrollably, surpassing 200% after 2019, further diminishing the purchasing power of the Lebanese lira.
Fourth, the economy is weak, unemployment is rising, and people have less money to spend. Investors also lack confidence in the economy.
Above all, there is a complete absence of political stability coupled with regional security tensions. In such a climate, investors flee, and the influx of U.S. dollars into the country decreases.
Although these factors also affect other countries, Lebanon has been one of the most impacted due to the scale of the crises, lack of reforms, and chronic mismanagement.
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