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Lebanese Currency From 14,000 billion in 1996 to 83,000 billion in 2017

By virtue of the Code of Money and Credit of 1963, Banque du Liban is vested with the exclusive right to issue the Lebanese currency, provided that “the notes of a value equal or over one pound shall bear the facsimile signature of the Governor and First Vice-Governor of the bank.”

Currency Protection 
The code requires BDL to keep “bullion and foreign exchange providing a safe cover for Lebanese currency equivalent in value to at least thirty percent (30%) of the money it issued and of its deposits at call, provided that the ratio of the said bullion and foreign exchange to the value of the money it issued is not under fifty percent (50%).” 

Notes and Coins Issued
Lebanese currency issued until June 2017 amounted to LBP 6,910 billion compared to LBP 2,954 billion in 1996. Table No.1 shows the distribution of money by denomination. 

The 100,000-pound denomination now represents 67% of the volume of currency issued by value, compared to 36.6% in 1996. During this period (1996-2017), the currency issued by BDL has risen by LBP 3,956 billion or 134%. 

Table No. 1: Distribution of Lebanese currency by denomination. 

Denomination (LBP)

1996

2002

 

2008

2017 (June)

-

Number (million)

Value (LBP million)

Number (million)

Value (LBP million)

 

Number (million)

Value (LBP million)

Number (million)

Value (LBP million)

1

29

29

29

29

 

-

-

-

-

5

22.4

112

22.4

112

 

-

-

-

-

10

14.9

149

14.9

149

 

-

-

-

-

25

6

150

8

200

 

2.4

60

4.760

119

50

21.24

1,062

28.08

1,404

 

13.520

676

14.020

701

100

22.86

2,286

37.960

3,796

 

37.120

3,712

41.810

4,181

250

40.628

10,157

49.452

12,363

 

54.088

13,522

127.876

31,969

500

14.402

7,201

38.478

19,239

 

59.474

29,737

99.640

49,820

1,000

364.485

364,484

182.428

273,643

 

89.527

89,527

147.879

147,879

5,000

26.243

131,215

19.282

96,410

 

16.972

84,860

27.362

136,813

10,000

45.688

456,880

51.610

516,100

 

15.626

156,260

13.943

139,434

20,000

20.941

418,820

15.382

307,640

 

12.022

240,440

19.787

395,749

50,000

9.591

479,550

13.175

658,750

 

15.905

795,250

26.924

1,346,204

100,000

10.820

1,082,000

18.574

1,857,400

 

17.458

1,745,800

46.573

4,657,380

Total

649.198

2,954,096

528.721

3,747,235

 

336.512

3,114,771

570.574

6,910,248

Source: Quarterly reports issued by BDL (1996-2017).
Note: As of November 24, 2007, banknotes of denominations of LBP 1, 5, 10, 25, 50, 100, and 250 were withdrawn from circulation, while coins with value of LBP 25, 50, 100, 250, and 500 were kept in circulation.

 

Bullion and Foreign Exchange 
BDL holds a large amount of bullion and foreign currency, more than keeping up with the sizeable increase in Lebanese currency issued. In June 2017, the value of issued currency amounted to LBP 6,910 billion while the assets of BDL in bullion and foreign currency were about LBP 68,300 billion (of which LBP 17,300 billion were in bullion and LBP 51,000 billion were in foreign currencies) representing coverage of 988%—although the legally defined ratio is 50%.
 
Currency in Circulation and in Banks
Although the value of Lebanese currency issued until mid-2017 was LBP 6,910 billion, currency in circulation or in banks was greater, amounting to around LBP 83,000 billion, of which: 
LBP 78,446 billion was deposits in banks
LBP 4,652 billion was currency in circulation
Table No. 2 below shows the rise in Lebanese currency in circulation and in Lebanese banks.

Table No.2: Lebanese currency in circulation and in banks (1996-2017).

Year

Currency in circulation

(LBP billion)

Currency in banks

(LBP billion)

Total

(LBP billion)

1996

1,161

12,839

14,000

2002

1,375

19,028

20,403

2008

2,174

35,150

37,324

2017 (June)

4,652

78,456

83,099

Source: BDL annual reports (1996-2017).
 

This increase in the volume of currency reflects the level of inflation experienced in Lebanon during this period. The volume of currency has increased from LBP 14,000 billion in 1996 to LBP 83,000 billion in 2017, i.e. by LBP 69,000 billion or about 493%


In light of the increase in public debt, economic recession, and the persistent public budget deficit, the Lebanese lives in a state of fear and anxiety over monetary and financial stability, especially when political or security crises arise. They rush to exchange some of their deposits and money in Lebanese pounds into foreign currencies, namely the U.S. dollar, in order to maintain their purchasing power in case the Lebanese pound collapses. Fear may occur if remittances to Lebanon in foreign currency decline, overseas remittances increase, or if sanctions are imposed. If this happens, it may destroy the banking and financial sector. 



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