Can the Banque du Liban really find a good solution to extinguish all the criticism? As part of a broader push to combat the financial crisis that has engulfed Lebanon, the country’s central bank aims to go high tech by adopting a digital currency. What’s in it for Lebanon?
In 2021, Lebanon’s central bank plans on launching a new digital currency to combat the parallel economy as well mitigate issues arising out of the coronavirus-induced Covid-19 financial crisis that has piled on more pressure to Lebanon’s massive debt-piled economy.
Addressing a gathering of officials, central bank governor Riad Salameh stated, “We must prepare a Lebanese digital currency project” as a means to shore up and build confidence in the country’s banking system.
“As for the monetary supply in the Lebanese market, it is estimated that there are $10 billion stored inside homes,” reported state-run National News Agency quoting Salameh as saying.
He went on to add, the digital currency project is scheduled to be launched in 2021 and is targeted at introducing a cashless economy and add resilience to the country’s financial system in order to support, strengthen and enhance the flow of money that flows in the local economy as well as remittances from abroad.
Much of Beirut’s foreign exchange comes from remittances from the country’s global diaspora. Case in point, in 2019, personal remittances represented nearly 14% of the country’s gross domestic product, according to a report from the World Bank. In 2004, it was as high as 26.4%.
Lebanon will maintain its gold reserves as a hedge against a a turbulent market, said Salameh. In the event of a demand for liquidity, the central bank could liquidate its bullion on the forex market for immediate relief.
“Lebanon doesn’t have any natural resources and we have to keep the gold because its an asset that could be liquidated in foreign markets if we face an inevitable, fateful crisis,” said Salameh to the state-run National News Agency.
Incidentally, the plan to introduce a digital currency was in the pipelines since some time with Salameh unveiling the plan in mid-2019 that the monetary regulator was working on the project.
Read more: https://www.bytheeast.com/2020/11/18/banque-du-liban-preparing-digital-currency-launch-next-year/