Currency board for Lebanon

Currency board for Lebanon

The Lebanese are currently subjected to depreciation, with

the ever-rising prices of goods and services, self-imposed limits on

withdrawals by banks at a rate of LBP 3,900 to the dollar, and a local currency

estimated at LBP 9,600

to the dollar as at March 1st 2021. Rampant inflation was

estimated at 84.8 percent for the full year 2020 according to the Central

Statistics Department, with end-of-year inflation from December 2019 to

December 2020 estimated at 14.8 percent. Additionally, any release of controls

for withdrawals in LBP would result in added inflation due to an expansion of

the monetary mass and a rush to buy USD currency at black market rates. The

depreciation of the currency reflects, in part, a loss of confidence in the

national currency, and a flight to safer cash currencies on the black market.

In light of this situation, some financial experts have recommended the

establishment of a currency board (CB) in Lebanon to help tackle inflation.

Broadly defined, a currency board is an authority in charge

of managing the money supply and the exchange rate of a country's currency, in

lieu of the central bank. Its tasks are set by law, and no printing of the

currency can occur without it being 100 percent backed by another foreign

currency, in most cases the US