Economic Strategy: Dollarization in Lebanon

Dollarization



Lebanon has experienced large-scale dollarization during and after its 15-year long civil war. Dollarization in Lebanon has been a reaction to economic instability and high inflation in the 80’s and beginning 90’s. The great stabilization and rapid development of the banking system do not have a significant impact on the decrease of the dollarization level. Although the inflation has decreased to reach one digit levels, Lebanon still characterized as a high dollarized economy. 

A year of economic and political crisis led to the devaluation of the Lebanese pound against the US dollar, which left Lebanese banks paralysed and private universities struggling to survive. Moreover, after the Beirut Port explosion on August 4, many hospitals and medical centres got destroyed and Lebanon started to undergo another economic crisis.

The Lebanese equity market continues to exhibit severe accessibility issues caused by capital controls introduced in October 2019. These have resulted in the repatriation of funds and index replicability issues for international institutional investors, as well as a significant gap between the parallel and official exchange rates for the Lebanese Pound. Recent developments in Lebanon make the timeline for a potential release of such measures unclear. Market participants have been continuously expressing worries related to the invest-ability and replicability of the MSCI Lebanon Indexes and related composite ones, such as the MSCI Frontier Markets Index.

Lebanon is undergoing an economic crisis, which is of no added value for its dollarization process. We want to achieve results such as:

  • more valuable importance to the Lebanese pound
  • decrease in economic issues
  • work together on the financial investments for the reconstructions of buildings and hospitals after the Beirut explosion
  • reparation of funds from Lebanese banks

We can all achieve these results together. Let’s work hard to give Lebanon what it deserves and a greater dollarization system.

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