MEA had said that it will accept payments made by any credit card or bank cheque provided that they are in foreign currency/iStockby Kudakwashe Muzoriwa
Lebanon’s Middle East Airlines (MEA) and other carriers operating in the country have reversed a decision to accept payment only in US dollars after a backlash, as the country grapples with a foreign currency liquidity crisis.
In a latest sign of collapsing confidence in the country’s decades-old peg to the dollar, the National News Agency reported that MEA—which is 99 per cent owned by Banque du Liban (BdL)—had announced that it will accept payments made by any credit card or bank cheque provided that the transaction is in foreign currency.
The announcement by MEA triggered a response from Lebanese President Michel Aoun, who insisted that air tickets should be paid in local currency as the law stipulates, adding that measures will be taken against any violations of the law.
Lebanon is grappling with the worst financial crisis that intensified in 2019 as capital flows into the country slowed down and protests erupted against ruling politicians over decades of corruption and bad governance.
According to Bloomberg, the Lebanese pound, pegged to the dollar since 1997, is losing value on the black market as shortages of foreign exchange paralyse businesses and threaten to tip Lebanon into default.
Lebanon has long relied on remittances from millions of citizens living abroad to finance its current-account deficit, prop up the banking system and bolster its currency’s peg. However, with capital outflows on the rise, BdL has been forced to ration dollars and local lenders have imposed limits on withdrawals and the movement of funds abroad.
Lebanon’s public debt reached about $89.5 billion as of November 2019, most of it held by the Lebanese lenders.
Last week, Lebanon asked the International Monetary Fund to send a technical team to discuss policy options and assess the situation in the economy as the government faces looming debt repayments and its predicament grows more dire.