Thread by @sugargrizzly

[THREAD] What is the haircut on dollars stuck in the Lebanese banking system (#Lollars)?

Well, it depends on how and when you look at it.
#Lebanon #LBP #dollar

2. Three ways to look at it:
- Withdrawal of USD in LBP at the prevailing rate (initially 1,507.5, now 3,900 LBP/USD) & exchange LBP for USD at parallel/black market rate
- Sale of a USD bank cheque for cash USD at a discount
- Solidere share price as a proxy (price⬆️=haircut⬆️)

3. What do these methods tell us? As of today 9 October 2020:
- Withdrawal at 3,900 LBP/USD: 56% haircut
- Bank cheque: 68% haircut
- Solidere shares: 65% haircut

4. A few comments:
- We would expect a difference between withdrawal+exchange vs. bank cheque: Cheques are for larger amounts so more difficult to execute (need to find more $) and therefore more expensive, in addition to incorporating a profit margin for intermediaries

5.
- The parallel market and Solidere share price were “agreeing” on a ~55% haircut in April 2020, right before authorities started interfering in the market

6.
- Solidere share price as a proxy is of course an approximation, given other factors also affect price. The closing price as of 17 October 2019 ($5.45/share) was used as a starting point [END]

(sources: lebaneselira.org, lirarate.com)