Lebanon’s AUB Abandons the Dollar Peg ... A Profound Sense of Hopelessness

In a much less upbeat appearance compared to that in a leaked July Zoom chat I watched, AUB’s 16th President, Dr Fadlo Khury, reiterated his mission in a virtual media roundtable zoom session: To provide a world class education with a focus on student welfare.

The American University of Beirut, a diverse campus with 96 countries represented, has lost 850 students this academic year for reasons related to the economic crisis and to the Beirut Port explosion. After repeated calls to the student body to pay tuition fees in dollars when possible, and with the very little take (3%), AUB will announce today it had no choice but to move the exchange rate closer to market rates after the five-fold depreciation of the Lira.

When it comes to tuition fees, which have been dollar denominated for a long time, AUB announced today it will abandon the defunct 1,500 Lira/Dollar peg (the open market rate is currently 8,250 Lira/Dollar) and instead adopt the 3,900 Lira/Dollar rate the Central Bank is using as a shock absorber after the discovery of a ~$90 billion black hole in the financial system.

After repeated calls to the student body to pay tuition fees in dollars when possible, and with the very little take (3%), AUB will announce it had no choice but to move the exchange rate closer to market rates after the 5 fold depreciation of the Lira

Effectively, the announcement means a 160% increase in tuition in Lira terms; The 3,900 exchange rate “quota” per account holder is barely enough to pay for basic food. AUB understands that the students and their families are unable to access their dollar deposits at that rate.

Compared to the open market rates, AUB is still offering students a 55% discount on the dollar denominated tuition fees. Average annual tuition is currently $26,000 at the preeminent private institution chartered by the state of New York as the Syrian Protestant College in 1863, and still supported by generous American philanthropy.

One main reason for this necessary decision is Faculty and Physician retention. A typical monthly package, which is paid in Lira at the official rate, went from $4000 to $800 at the open market exchange rate, enabling efforts from Gulf states to actively recruit AUB’s finest professionals. Dr Khury, aware of the “profound sense of loss of hope” realises he can’t hold them hostage, and hopes they will return. To that effect, AUB is granting two and three year leaves of absence. Additionally, Khury will announce today that the first $20,000 of faculty salary will be paid abroad, and in US Dollars.

It is clear that AUB is not receiving financial support from Lebanon’s government, yet the populace sees AUB as a national institution, and somehow expects it to have unlimited resources; Not surprising in a nation that asks for its rights and is unaware of its duties. Khury, once my classmate, recognises his duty is to safeguard the University for future generations, ensure its accreditation is unharmed, and that it remains a beacon of knowledge and hope in the Arab world.

When I asked him about the endowment, reported to be at $769 million on the University website, and questions surrounding deposits and investments in Lebanon despite his July statement that most of AUB’s resources are abroad, Dr Khury quickly took the question in another direction, instead talking about resources in USA. Either AUB had the foresight of not trusting Lebanon’s banks, after all the Board’s finance committee or business school Dean should have seen right through it when Central Bank issued dollar denominated certificates of deposit with 30% coupons OR AUB managed to get its money out “illegally” like many privileged Lebanese OR AUB has lost a bit of money and is not willing to disclose. Transparency might be Dr Fadlo Khury’s best strategy going forward.

It is clear that AUB is not getting governmental financial support, yet the populace sees AUB as a national institution, and somehow expects it to have unlimited resources; Not surprising in a nation that asks for its rights and is unaware of its duties

Khury congratulated himself on his honesty, he either must be benchmarking against previous presidents or he is the only voice of AUB, thus feels he is always communicating for AUB. Delivered in forceful presidential statements, his decisions are in the best interest of AUB, and all figures point out that this president’s policies have improved students’ welfare on every level with a record 700 students now benefitting from scholarships.

Khury is taking on huge responsibilities and making necessary decisions. AUB’s survival is critical to Lebanon, it is one of few remaining legitimate institutions operating in Lebanon, with 5,800 faculty and staff and 9,500 students.

Education has helped Lebanon survive its first 100 years, Khury realises the weight of the burden he carries, and while he has traditionally operated with a strategy of maximum support minimum intervention, he might have to assume more responsibility this time around.