The Lebanese pound (LBP) continues to devalue and dropped from 30,000 LBP to the dollar at the beginning of August to 34,000 LBP to the dollar by the month’s end. Looking back at the first half of 2019, the Lebanese pound was around 1,500 LBP to the dollar and stayed at a predictable rate.
LIMS stated that the number one reason for poverty in Lebanon is due to the LBP’s devaluation. In most of the country, people get their salary paid in the local currency, while the market prices are shifting toward unofficial dollarization. LIMS argued for a full and official dollarization that would enable businesses to price in dollars. After being allowed to price in dollars, businesses would be able to dollarize salaries, thus protecting the remaining purchasing power of their employees. Only then, taxes and tariffs can be dollarized. And the central bank can buy back all the LBPs in deposits and in circulation. From this perspective, the “customs dollars” are misplaced since the government is asking businesses to dollarize their customs’ payment, while imposing on them to price in LBP. Alternatively, Lebanon could adopt a currency board that would clone the LBP to the USD, so to speak, meaning that the entire money supply in LBP would be 100% covered by the reserve currency. Having a currency board in place would allow for LBP and dollars to be simultaneously in circulation.