Acting Governor of the Bank of Lebanon, Wassim Mansouri, has announced a significant reduction in the monetary supply, noting that the quantity of Lebanese lira in circulation has decreased from 82 trillion at the beginning of 2023 to 59 trillion liras. This policy shift has led the central bank to increase its foreign exchange reserves by 1.1 billion US dollars. Governor Mansouri also highlighted the central bank cannot replace the government and warned of the repercussions of delaying solutions to the banking crisis and initiating negotiations with creditors.
 
Mansouri’s analysis provides compelling evidence that LIMS has won the battle of ideas on hyperinflation and currency devaluation. When the consensus in Lebanon erroneously attributed currency devaluation to the trade deficit, LIMS, through program ERASE, demonstrated that it was the increasing money supply, not the trade deficit, driving devaluation. We have long argued that reducing the money supply would lead to currency stability and an increase in foreign exchange reserves. We are proud to see that the new acting governor of the central bank is adopting these principles.
 
However, we must remain vigilant. The proposed salary and wage increase in the 2024 government budget may require the government to seek central bank funding. It is essential to separate the central bank’s monetary policy from the government’s fiscal policy. The central bank must maintain its focus on stabilizing the currency and increasing foreign reserves, not on funding public expenditures.
 
To regain international trust and balance public finances, the government must implement serious reforms, combat tax evasion, and reduce wasteful spending. Printing more Lebanese pounds to cover deficits devalues the currency and depletes reserves, ultimately harming the population.

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