After the approval of the budget by the parliament, the minister of finance announced the official devaluation of the Lebanese pound (LBP) from 1,515 LBP to the dollar to 15,000 LBP, before retracting it in a later statement. Many pundits considered the announcement and retraction to be intentional, aiming to prepare for the official devaluation, especially since the 2022 budget already changed the rate of costume duties to 15,000 LBP. Meanwhile, the local currency continued its devaluation on the black market and dropped from 33,750 LBP to the dollar at the beginning of September to 38,500 LBP to the dollar by the end of the month. 

LIMS explained that the official rate is generally bogus as it does not reflect an actual rate that dollars could be acquired in exchange for LBP. Still, the official rate has an impact on the calculation of tariffs, fees, and taxes on operations denominated in USD. Furthermore, the official rate might impact the rate at which depositors withdraw their dollar-denominated deposits and how the private sector settles their dollar-denominated loans. 

Time and time again, LIMS has stated that multiple exchange rates are an unhealthy phenomenon and should be terminated. However, the reform cannot be done simply by changing the official exchange rate without altering the underlying monetary policy that is causing inflation and devaluation. Most salaries in Lebanon are denominated in LBP that has lost more than 95% of its value since the beginning of the crisis driving poverty to a record level. To put a halt to inflation and currency devaluation, LIMS argued for a currency board, which allows Lebanon to solve the monetary crisis almost immediately.  A currency board would clone the LBP to the USD by having the entire money supply in LBP covered 100% by USD reserves.  

Alternatively, Lebanon could switch to a full and official dollarization that would enable businesses to sell goods and services in dollars. From a legal perspective, the USD income would allow companies to dollarize salaries, thus protecting the remaining purchasing power of their employees. Once businesses and employees of the private sector have their income in a hard currency, taxes and tariffs can be dollarized, allowing a dollarization of the public sector as well. The central bank would simultaneously buy the amount of LBP in circulation switching to a full dollarization.  

LIMS Media Interviews: 

• Is Dollarization Best Option For Lebanon’s Collapsing Economy? September 2, 2022: Al Monitor, Article EN 
• Magic Solution That Ends Salary Crisis: Economist Reveals How Lebanon Can Quickly Recover, September 3, 2022: Spotshot, TV Interview AR 
• New Record For The Dollar, September 6, 2022: SBI, TV Interview AR 
• Upward Trajectory Will Continue In The Next Stage, September 9, 2022: VDL, Radio Interview AR 
• “Dollarization” Of Salaries And Wages For Public And Private Sectors Linked To “Dollarization” Of Prices And Contracts, September 14, 2022: Al Afkar, Article AR 
• Lebanese Pound Slides To New Low, September 14, 2022: English News, Article EN 
• Coinciding With The End Of Summer And Budget Deficit…Will Dollar Exchange Rate Touch Fifty Thousand? September 15, 2022: Annahar, Article AR 
• Budget Ignites The Dollar…“It Goes Down An Unreasonable Decline”, September 20, 2022: Lebanese Forces, Article AR 
• Newsfolio Special: When “Banking” Turned From A Medicine Into A Disease! September 26, 2022: News Folio, Article AR 
• Economic Researcher Garabed Fakrajian: Lebanese Expect Further Major Collapse In Local Currency, September 27, 2022: Al Yaman, TV Interview AR 
• What Does Official Dollar At 15,000 LBP Mean? September 28, 2022: Naqd Politics, TV Interview AR 
• Unifying Official Exchange Rates Necessary Step To Curb Speculation, September 28, 2022: OTV ,TV Interview AR