Lebanon lira no longer fit for airline owned by central bank

Lebanon’s Middle East Airlines and other carriers operating in the country will no longer accept payments in local currency, the latest sign of collapsing confidence in the country’s decades-old peg to the dollar.

Starting on Monday, the airline 99 per cent owned by the central bank will accept payments made by any credit card or bank cheque “provided that the operation is in foreign currency,” according to state-run National News Agency.

The announcement triggered a response later on Sunday from Lebanon’s President Michel Aoun, who insisted that air tickets should be paid in local currency, as the law stipulates.

He said measures will be taken against any violations of the law, according to NNA.

An MEA spokeswoman didn’t wish to give an immediate comment, and said airline officials will hold a press conference on Monday about the matter.

Lebanon is grappling with its worst economic and political crisis in decades, following months of protests that forced the previous government to resign. The 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 long relied on remittances from millions of citizens living abroad to finance its current-account deficit, prop up the banking system and bolster the pound’s peg.

But with capital outflows on the rise, the central bank has been forced to ration dollars and local lenders have imposed limits on withdrawals and the movement of funds abroad.

Jamil El Sayyed, a parliament member, said on Twitter that the decision could be illegal.

Lebanese law stipulates that any institution owned, financed or managed by the government, fully or in part, is obliged to accept the nation’s currency or the official dollar rate set by the central bank.