Chapter

Appendix I Exchange and Trade System

Author(s):
Jose Martelino, S. Erbas, Adnan Mazarei, Sena Eken, and Paul Cashin
Published Date:
December 1995
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This section summarizes Lebanon's exchange and trade system as of May 31,1994.

Exchange Arrangements

The currency of Lebanon is the Lebanese pound. The authorities do not maintain margins in respect of foreign exchange transactions, and exchange rates are determined on the basis of demand and supply conditions in the exchange market. However, the authorities may announce buying or selling rates for certain currencies and intervene when necessary in order to maintain orderly conditions in the foreign exchange market. On May 31, 1994, the rate for the U.S. dollar was LL 1,684 per US$1. There are no taxes or subsidies on purchases or sales of foreign exchange. The duties and taxes on imported goods and services invoiced or expressed in foreign currencies are calculated at a conversion rate of LL 800 per US$ 1. Banks are allowed to engage in spot transactions in any currency but are prohibited from engaging in forward transactions exceeding LL 500,000 unless the transactions are related to foreign trade. Lebanon formally accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Fund's Articles of Agreement effective July 1, 1993.

Prescription of Currency

No restrictions are imposed on exchange payments abroad or on receipts in Lebanon.

Imports and Import Payments

Imports of a few goods (mainly arms and ammunition, narcotics, and similar products) are either prohibited or reserved for the Government. All imports from Israel and South Africa are prohibited. Imports prohibited year-round include citrus fruits, apples, olives (excluding olives in cans weighing less than 2 kilograms), olive oil, and peanuts; imports prohibited during a specified period of the year include squash, eggplant, green beans, watermelons, peas, peaches, and apricots. Imports of certain other agricultural products and all seeds require a license. Import licenses are also required for certain finished goods, sanitary ceramic wares, insulated electric and telephone wires, and copper cables. All other commodities may be imported without a license. Foreign exchange to pay for imports may be obtained freely.

Before issuing letters of credit, banks are obliged to ensure that importers possess a valid import license, if required. Importers must place with their banks a prior deposit in a local currency amount equivalent to 15 percent of the value of import letters of credit; the banks are not required to deposit such amounts with the Bank of Lebanon.

A municipality tax of 3.5 percent is levied on the value of all goods imported, except those originating in an Arab country. A stamp tax is levied on all imports, except gold and bank notes, at the rate of LL 3 per LL 1,000 of the value of goods. The tariff regime is based on the Brussels Tariff Nomenclature. Ad valorem duty rates on most products range from 18 percent to 90 percent and are applied on a most-favored-nation basis, except for certain imports from member countries of the European Union (EU) and Arab countries, which are accorded a preferential rate. A few products are subject to a specific duty. A surcharge of 10 percent of the applicable import duty is levied on certain textiles and garments. Surcharges are also levied on motor vehicles, imitation jewelry, watches, and alcoholic beverages. The surcharge on motor vehicles is levied at the following rates: 35 percent on vehicles valued at LL 10 million or less and 60 percent on vehicles valued at more than LL 10 million. The rate of surcharge on watches and imitation jewelry is 7 percent. The following rates of surcharge apply to alcoholic beverages: beer, LL 140 per 100 liters; champagne, 60 percent of the value; wine and arak, 20 percent of the value; and whiskey, 30 percent of the value. An additional construction tax of 11 percent, a municipality tax, and an internal tax ranging from LL 2.5 to LL 9.5 a liter are also imposed on champagne, wine, liqueurs, and whiskey. A tax of 60 percent is imposed on other beverages.

Payments for Invisibles

There are no restrictions on payments for invisibles. Foreign exchange may be obtained in the free market.

Exports and Export Proceeds

Exports of certain goods (mainly arms and ammunition, narcotics, and similar products) to any destination and all exports to Israel and South Africa are prohibited. Exports of wheat and wheat derivatives to any country and all exports to the Democratic People's Republic of Korea require a license. Foreign exchange receipts from exports may be retained, used, or sold in the free market.

Proceeds from Invisibles

Foreign exchange receipts from invisibles may be retained, used, or sold in the free market.

Capital

There are no limitations on capital payments or receipts. Foreign exchange may be obtained or sold in the free market. Banks are prohibited from extending to nonresidents loans in Lebanese pounds and loans secured by guarantees from nonresident banks unless the transactions are for commercial or investment purposes in Lebanon. Banks are prohibited from receiving deposits, and from opening accounts in Lebanese pounds, for nonresident banks and Financial institutions. Bank credit in Lebanese pounds to residents for the purchase of foreign exchange for purposes other than foreign trade transactions is subject to a special reserve requirement; the required reserve amounts to 40 percent of Lebanese pound loans that give rise directly to foreign currency deposits, and 15 percent of foreign currency deposits directly arising from Lebanese pound loans to depositors. Banks are authorized to maintain long or short net foreign currency positions up to 5 percent of the total core capital. In addition to the above, banks are authorized to maintain short positions not exceeding 60 percent of the same core capital that is paid up in Lebanese pounds. The amounts of investments in foreign currencies in nonresident banks and financial institutions are not included in net foreign currency positions. Investments in nonresident banks and other foreign institutions are exempt from the net foreign currency positions. Under a “free zone” banking facility, the commercial banks are exempt from reserve requirements and fees for deposit insurance on nonresidents' foreign currency deposits. Also, nonresidents are exempt from the 10 percent tax on interest earnings from foreign currency deposits.

Under the National Investment Insurance Scheme, new foreign investments are insured against losses arising from noncivil risks, including war. Compensation is paid on losses that are more than 10 percent of the insured value.

Gold

Residents may freely hold gold in any form at home or abroad and may freely negotiate gold in any form with residents and nonresidents, at home or abroad. The importation and exportation of gold in any form are freely permitted and do not require a license but must be officially recorded. The importation, exportation, and domestic sale of foreign gold coins must be covered by a certificate, issued by the Office for the Protection of the Consumer, that indicates the gold content and weight.

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