Lebanon is set to issue new, higher denominations of its national currency, notably LBP 500,000 and LBP 1,000,000 bills, in an effort to address practical challenges caused by the collapse of the Lebanese pound. This move follows the approval of a law by the Lebanese Parliament, which grants the Central Bank the authority to proceed with the issuance.

Concerns have arisen over whether the introduction of these higher denominations could negatively impact Lebanon's already fragile economy, especially in terms of inflation. In response to these concerns, Habib Zoghbi, an economic and financial expert and honorary president of the Harvard University Alumni Association in Lebanon, told Al-Anbaa newspaper that such measures are typically taken during periods of rapid currency collapse due to extreme inflation, a scenario Lebanon experienced a few years ago.

"What's happening now, however, is merely a move to facilitate daily transactions for the people, not a sign that the currency is collapsing or on the brink of collapse," Zoghbi explained.

He reassured the Lebanese public that there was no cause for alarm.

"Since Wassim Mansouri assumed the role of acting Governor of the Central Bank, the Lebanese pound has remained stable, and it is expected to stay that way for the foreseeable future. The purpose of issuing higher denominations is to streamline the process of handling money, replacing stacks of lower-value bills with smaller, more manageable amounts."

While some analysts argue that the true impact of issuing the 500,000-pound and one million-pound notes will become evident only when the International Monetary Fund (IMF) pushes for the liberalization of Lebanon's exchange rate, Zoghbi holds a different view. He noted that "the IMF has not raised the issue of liberalizing the pound recently, as it recognizes that Lebanon is not currently in a stable enough position to allow the currency to float. A floating exchange rate would either cause the pound to collapse if it has no value or appreciate if the economy were in a healthy state, which the Lebanese economy currently is not."

“The IMF and Western nations prefer not to use artificial means to stabilize the currency. But in Lebanon’s case, allowing the currency to fluctuate at this stage would only lead to more chaos, speculation, and issues like those associated with the Sayrafa platform, which has benefited certain bank managers, influential figures, and politicians. Only when Lebanon achieves greater political stability, an independent judiciary, and improvements in investment, growth, and job creation can we follow the example of other countries where the currency reflects the actual health of the economy," Zoghbi explained.

Supporters of the new banknotes argue that issuing larger denominations is necessary to maintain transactions in the Lebanese pound, especially in the face of growing dollarization in the economy, without increasing the overall money supply. By replacing the current banknotes, the new denominations will reduce the logistical burden of dealing with large sums of Lebanese currency.

However, some critics worry that the issuance of higher-value bills could facilitate money laundering or smuggling. Zoghbi acknowledged this possibility but pointed out the difficulty of exchanging Lebanese currency abroad.

"It is possible, though challenging, to exchange Lebanese currency outside of Lebanon," he said. "There is, however, still the risk of money being smuggled from Lebanon to Syria or vice versa, particularly if the Lebanese pound strengthens in the future—especially with the potential signing of an agreement with the IMF."

The process of issuing the new higher-denomination banknotes will begin once the law is signed by the president and published in the Official Gazette. According to the Banque du Liban (BDL), the production and circulation of the new notes is expected to take around a year.

Despite the concerns, officials have assured that the issuance will be gradual, with the money supply being closely monitored to maintain the current liquidity level, which is estimated to be around LBP 82 trillion. Smaller denominations will continue to circulate alongside the new bills.

A further point of discussion has been why authorities are not opting for a currency redenomination—such as removing zeros from the banknotes (for instance, turning a 100,000-pound bill into a 100-pound note, roughly equivalent to $1.1). Banking sources told LBCI that redenomination would be far more costly, as it would require reprinting all denominations.

The idea of issuing larger bills had been floated in the past, but conditions are now deemed more favorable for its implementation. The Lebanese pound has remained relatively stable for nearly two years, and early signs of political stability and the commencement of financial reforms are providing a cautious sense of optimism. These reforms are viewed as essential to restoring confidence in Lebanon’s national currency and its banking sector.