Lebanon prints new banknotes … Do you worry?

Last week witnessed a remarkable development in the Lebanese financial file,
With the parliament approved the allowance of the Bank of Lebanon to print new banknotes, while emphasizing that the size of the monetary mass circulated in the market is not increased.
What is the goal of this step? Is it considered a negative indication of the economic situation or the introduction to a new deterioration?

Why print new cash categories?

Allow the printing of new banknotes does not necessarily mean pumping more currency in the market,
Rather, it aims to Replace small papers with larger cash papersLike the 500,000 liras and perhaps a million.
The provisions of Articles 3 to 8 of the “Cash, Credit and Central Bank Law” were amended to implement this decision, which is the third amendment after two previous amendments in 1987 and 1992.

This procedure raised many questions between the Lebanese, especially since every financial step in the country is often met with doubt and anxiety,
Due to previous experiences and the absence of transparency in many monetary and financial policies.

Does this step mean a new collapse of the Lebanese pounds?

Economist and financial expert emphasizes Dr. Habib Al -ZoghbiHonorary President of the Harvard University graduates Association in Lebanon,
In an interview with the Kuwaiti newspaper “Al -Anbaa”, this step is not concerned at all.
And he says:

“Countries usually resort to printing larger categories when the currency is in a rapid collapse due to the massive inflation, as happened in Lebanon 3 or 4 years ago. Today, the goal is to facilitate daily transactions and not because the lira is collapsing again.”

The stability of the lira: fact or illusion?

The Lebanese Zoghbi reassures that The Lebanese lira is not currently in a state of deterioration,
Rather, it has been witnessing a kind of relative stability since the Acting Wassim Mansouri was the governor of the Banque du Liban,
This stability continued even after the appointment of the current ruler Karim Saeed. And confirms:

“There is no direct danger to the stability of the currency, and printing only aims to alleviate the burden of dealing with large quantities of small banknotes.”

Will this decision contribute to high inflation?

It is normal for these questions to be asked,
Especially in light of the fear that printing new banknotes may lead to additional enlargement, but Al -Zoghbi believes that this does not apply to the current situation.
As long as The monetary block will not increase,
Rather, the old papers will be replaced with a higher value, then The inflationary effect will be limited or non -existent.

What is the relationship of the International Monetary Fund to this decision?

Some believe that this step is a prelude to the liberalization of the exchange rate, which is an old demand for the International Monetary Fund. But Al -Zoghbi sees that:

“The IMF is no longer demanding the liberation of the lira at the present time, because it realizes that Lebanon does not currently enjoy sufficient stability to take this step. The currency should not be left to flip up randomly in an unstable market.”

He adds that leaving the exchange rate for free fluctuation may return the country to the stage of financial chaos and speculation,
It also occurred during the period of “Sarafa platform”, which some have benefited illegally.

The real goal: facilitating transactions and confronting the dollar

Among the goals stated for this decision is Encouraging people to use the Lebanese lira instead of the dollar,
Especially with the widespread phenomenon of dollar in various daily transactions.
Printing banknotes in large categories facilitate purchases, transportation and storage, and reduce the need to carry a huge “package” of paper money.

Is there a risk of facilitating smuggling or money laundering?

Some may wonder whether these new leaves will be used to smuggle or whiten money. Here, Al -Zoghbi admits that this is a possibility, but:

“It is difficult to use the Lebanese lira outside Lebanon, and it cannot be easily dispensed in foreign markets. However, the chances of smuggling to Syria remain, especially if the lira’s position improves in the future after signing an agreement with the IMF.”

Summary: A technical step that should not worry the Lebanese

In light of the difficult economic conditions the country is going through,
It is important not to be drawn behind pessimistic analyzes or non -based theories on clear foundations.
Printing new banknotes is not necessarily evidence of an upcoming crisis,
It can be a step Administrative and technology aims to regulate the monetary market and facilitate the daily life of citizens.