Central Bank’s Plan to Issue Larger Banknotes Sparks Questions on Inflation, Currency Stability

Lebanon's Central Bank is preparing to issue new banknotes in denominations of 500,000, 1 million, and 5 million Lebanese pounds following Parliament’s approval of amendments to several provisions of the Monetary and Credit Law. Lebanon has been grappling with one of the world’s worst financial crises since 2019, with its currency losing more than 95% of its value on the parallel market. 

The move, aimed at facilitating daily transactions and reducing the strain of handling large volumes of cash, comes amid widespread debate over its potential impact on prices, market liquidity, and the stability of the exchange rate. 

Economist and financial expert Mahmoud Jebai told Annahar that while the step was “delayed,” it remains “necessary” under current economic conditions.

Jebai said the measure is part of broader efforts to maintain the exchange rate at around 89,500 pounds to the U.S. dollar.

“This stability is crucial,” he noted. “Any change in the exchange rate would require a comprehensive economic plan and wide participation from the country’s productive sectors. For now, maintaining monetary stability remains the best option despite the crisis.”

Jebai also explained that printing higher-denomination notes will reduce costs for the Central Bank.

“Previously, printing a 100,000-pound note cost about one U.S. dollar, while a 5 million-pound note is worth roughly 55 dollars,” he said. “This difference gives the Central Bank greater flexibility in managing the money supply and eases the logistical burden of printing and circulating massive quantities of smaller notes.”