Lebanon’s MEA to stop accepting domestic USD payments

MEA – Middle East Airlines (ME, Beirut) will cease to accept payments for its services in US Dollar transfers from deposits held in Lebanese banks due to their lack of liquidity, the Financial Times has reported. The flag carrier, which is majority-owned by the Lebanese central bank, is now demanding payments in “fresh dollars”, namely US dollars not deposited in Lebanese banks, Chairman Mohamad el-Hout said. The Lebanese money market is highly dollarized with many citizens and businesses traditionally depositing their savings in US Dollars. Lebanese banks formally hold USD87 billion in deposits, around 80% of the country’s total savings. However, as multiple crises have ravaged the country’s economy, banks have restricted the liquidity of these funds. They currently only permit domestic transfers of dollars and select “urgent” international payments. Clients can also withdraw Lebanese pound-equivalents of their dollar deposits, converted at the official rate – which stands at half of the black market dollar rate. “A dollar in the banks is equivalent to 40% of a dollar outside Lebanon… I will have all of these [local] dollars in our bank, and I’m not able to use them or to transfer them outside,” Hout said. Hout added that the airline would stop accepting “local dollars” once its owner, the central bank, stops subsidising fuel. No specific date was given. Hout underlined that the continued acceptance of “local dollars” would threaten MEA’s survival.