Fact Checking the Arab Media

Since at least October 2019, when Lebanese banks first shuttered their doors for several weeks in response to wide scale street protests, the country has been experiencing what the World Bank deems as one of the worst combined economic, financial and social Depressions in modern history. As a result, the Lebanese currency, the Lira, has steadily declined in value compared to the US Dollar (USD). In September 2019, one USD was equivalent to 1,515 Lira. This August, on the black market, 1 USD can fetch as much as 35,000 Lira. And therein lies at least one (of several) steep problems facing Lebanese officials and citizens. In a feeble attempt over the last three years to control the decline of the Lira, policymakers employed multiple different exchange rates: The still official pegged rate, the actual black market rate, the Central Bank’s “Sayrafa” rate (the rate used by money transfer organizations to convert incoming remittances) as well as several other exchange rates, including, crucially, the one which determines the value of taxes collected on imports.

That rate, called the “custom’s dollar,” is still set at 1515 LL to 1 USD when calculating taxes owed in Lira for imported items; meaning the Lebanese government has seen steep declines in the real value of its customs revenue since the crisis began in October 2019. As the website Al-Monitor reported earlier this year, “amid the freefall of the local currency value since October 2019 and the emergence of multiple dollar exchange rates, talks about amending the exchange rate of the customs value have made headlines.”

In this regard, on August 17 Caretaker Minister of Labor Mustafa Bayram made headlines by telling the radio show “The Voice of Lebanon” that, “the decision to raise the customs dollar value does not require the government's vote on it.” Signaling that the customs rate was finally about to be adjusted towards market realities, whether the full government of the parliament liked it or not, Bayram added, “The Minister of Finance has informed other ministers during yesterday’s meeting that there is an exceptional law that enables him to adjust the value of the customs dollar, and this is what he will do in agreement with the governor of the Central Bank.” Such a measure, Bayram said, was “inevitable” so as to be able to get merchants “to share their profits with the state’s treasury.”

Fact Check Assessment: False

Shortly after Bayram’s pronouncements were made public, Caretaker Finance Minister Youssef Khalil joined the fray and declared that he indeed had an “exceptional” prerogative to adjust the applicable rate in calculating customs duties - without either the full cabinet or the legislative branch weighing in - and will do so “in agreement with Bank Du Liban (Central Bank of Lebanon) governor, Riad Salameh. According to one daily who spoke with Khalil, the caretaker minister:

“Clarified that he was referring to two laws. The first is Law No. 93 of Oct. 10, 2018, through which the Parliament had granted the cabinet the right to intervene for five years in the customs field (while, in principle, this falls within the authority of the legislative branch). The second is Article 35, paragraph 4d of Decree No. 4461 of Dec. 15, 2000 regulating some customs clearances at land and sea borders. This provision states that in case “the value of the goods on the purchase invoice is denominated in foreign currency, the amount shall be converted into Lebanese lira based on the average of the exchange rates in effect on the date of the invoice, an average based on the exchange rates determined monthly or periodically by the BDL.”

Unfortunately for Bayram and Khalil’s confident interpretation of the relevant statutes regarding the finance minister’s alleged unilateral powers, the same daily pointed out that these arguments were unlikely to carry the day in court, not least since the government which both minister’s serve is technically a “caretaker” one (the entire government resigned a few months ago).

Six days later, a definitive answer came by way of the Council of State, which didn’t even have to resort to technicalities about the exact status of the caretaker government. As the President of the Beirut Merchants Association, Mohammad Choucair, explained during a public meeting with Khalil present on August 24: “...there will be no government initiative to make this [custom’s dollar] adjustment, given that the Council of State ruled, in an opinion issued after being referred by the Presidency of the Republic, that the coverage provided by Law No. 93 of 2018 applied to the tax rate and not the exchange rate used.” As a result, although Bayram and Khalil were able to refer to parts of the relevant Lebanese statutes in order to support their claims, in the days that followed the Council of State made clear that a comprehensive reading of the law meant that the finance minister alone does not have the power to change the exchange rate - or custom’s dollar - used when assessing taxes on imports, although it remains undecided by the court whether the finance minister may in fact be able to unilaterally adjust the tax rates without a full government vote or an act of parliament.