arghavannews
  • UAE&MiddleEast
  • Persian
Search
Technology
  • Advertise
Health
Entertainment
  • UAE&MiddleEast
  • Persian
  • Advertise
© 2022 ArghavanNews Network.
Reading: Lebanese Lira: Is it Time for a New Exchange Regime?
Share
Sign In
Notification Show More
Latest News
I hope the continuation of the series “Noon Kha” will be made soon
September 1, 2023
Expo City’s new Sustainable Living
May 10, 2023
UAE paving the way for Crypto
May 9, 2023
Dubai crypto regulator awards first broker-dealer M                 
May 6, 2023
Who Benefits From CBDCs?       
May 5, 2023
Aa
arghavannews
Aa
  • Business
  • Politics
  • Travel
  • Entertainment
  • Science
  • Technology
  • Fashion
Search
  • UAE&MiddleEast
  • Persian
Have an existing account? Sign In
Follow US
  • Advertise
arghavannews > Blog > UAE > Lebanese Lira: Is it Time for a New Exchange Regime?
UAE

Lebanese Lira: Is it Time for a New Exchange Regime?

abdorahman.arman
Updated 2023/04/30 at 4:11 AM
Share
3 Min Read
SHARE

The Lebanese Lira has lost 98% of its value since the start of economic meltdown in Lebanon. A virtually useless currency that no longer functions as a currency, it doesn’t have much of a future. Financial expert Mike Azar believes the damage is irreparable. With this in mind, the question is, should Lebanon give up on monetary sovereignty and adopt a hard peg, like dollarization or a currency board?

Many believe that dollarization with a stable currency would bring the confidence of the economic agents back to Lebanon, and it would attract investment and capital. But, it is vital to accompany dollarization with a reform plan that includes complete restructuring of the banking system since this policy will force the banks to recognize bankruptcy once their balance sheets are dollarized. In Ecuador, 20 banks had to close when a similar policy was implemented.

Another form of hard pegs is currency boards or fixed exchange regimes that require a new Lebanese currency to be created and pegged at a fixed exchange rate. Nikolay Nenovsky, one of the architects of the currency board in Bulgaria, pressed for a Lebanese version during a Lefmi organised webinar. Hard pegs, though, are not without their challenges. For the system to work, Lebanon would need to find a stable inflow of dollars. And the central bank can no longer print money to finance government deficits. This requires strict budgetary rigor that affects the entire economy.

Lebanese banks’ foreign currency liabilities are listed in Lebanese Lira, forcing them to liquidate their debts slowly by converting them into the Lira from US dollars. The government’s excessive money printing contributes to debasing the Lira and a rampant dollarization with a disastrous socio-economic cost. Workers whose incomes are in Lira have become excluded from the socio-economic tissue of restaurants, shopping malls, big hospitals and touristic venues in favor of USD holders.

Lebanon needs a new exchange rate regime to put an end to the current chaos. The options are a hard peg that includes dollarization where the Lira is entirely replaced by the Greenback, or a currency board with the introduction of a new national currency guaranteed by foreign exchange reserves. Although giving up on the national currency and monetary sovereignty is never ideal, it may be inevitable. Experts agree that it requires political will, but there seems to be very little incentive for the ruling elite to change the current system.

In summary, Lebanon’s crisis has become a deliberate crisis, and it seems that no matter what exchange regime is adopted, it requires restructuring and reform to achieve sustainability in the public finances or financial system.

عبدالرحمان زمین پیما

عبدالرحمان زمین پیما

Author

آرمان جعفری

آرمان جعفری

Author

You Might Also Like

Expo City’s new Sustainable Living

UAE paving the way for Crypto

Dubai crypto regulator awards first broker-dealer M                 

Who Benefits From CBDCs?       

What are the view of the Americans on CBDC?                          

Sign Up For Daily Newsletter

Be keep up! Get the latest breaking news delivered straight to your inbox.
[mc4wp_form]
By signing up, you agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.
abdorahman.arman February 14, 2023
Share this Article
Facebook Twitter Copy Link Print
Share
Previous Article ESG investors cannot stop investing in mining.
Next Article RAKBank will Invest up to $163.5 Million in the Digitalisation of their services
Leave a comment Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Latest News

I hope the continuation of the series “Noon Kha” will be made soon
ARTS & CULTURE world September 1, 2023
Expo City’s new Sustainable Living
UAE May 10, 2023
UAE paving the way for Crypto
UAE May 9, 2023
Dubai crypto regulator awards first broker-dealer M                 
UAE May 6, 2023

    Quick Link

    • UAE&MiddleEast
    • Persian

    Top Categories

    Key Responsibilities

    arghavannews

    © 2022 ArghavanNews Network.

    Removed from reading list

    Undo
    Welcome Back!

    Sign in to your account

    Lost your password?