Lebanon approaches the LBP one million banknote: report

The inclusion of an accelerated bill aimed at amending two articles in the Monetary and Credit Law within the agenda of the Lebanese Council of Ministers raised many concerns in economic and public circles, given its sensitivity in light of the collapse of the exchange rate, and the delay in the adoption of a comprehensive rescue plan based on a final agreement with the International Monetary Fund (IMF).      

Concerned banking and financial sources indicated that the amendments would exclusively affect the process of issuing cash, which automatically means that the government is about to propose legislation to issue new categories of banknotes likely to carry the values of half a million and one million Lebanese lira.  

This article was originally published in, translated from Lebanese newspaper Asharq al-Awsat.     

There is information about parallel trends regarding amendments related to the centralization of the issuance privilege specified in the Central Bank of Lebanon so that it is transferred to the executive authority represented by the Ministry of Finance, or through participatory decision-making and management between the two parties, according to Asharq Al-Awsat.   

The most significant currency category issued and circulated currently amounts to LBP 100,000, which hardly equals one dollar in consumer markets that depend on the current rate in parallel markets. By comparison, before the financial crisis, which worsened since the fall of 2019, the 100,000 note was worth about 66 USD.     

A banking official notes, in contact with Asharq Al-Awsat, that the tendency to legislate the issuance of the half-million and one-million banknotes will automatically reduce the quantities of cash carried to complete consumption operations and pay dues.   

As for the concerns, according to the banking official, they lie in the possibility of legislative “harm” to the independence of the Central Bank, which the Monetary and Credit Law and its subsequent amendments fortify.  

Thus, introducing Article 47 for deliberation and amendment automatically indicates a reconsideration of granting Banque du Liban exclusively the privilege of issuing the stipulated cash.   

This can be deduced by explicitly linking it with Article 10 of the same law, which states that issuing cash is a privilege of the state, and the state can grant this privilege to a central bank it will establish.