A new Lebanese lira for economic renewal

The recent sociopolitical developments in Lebanon have created a mood for change and a hope for renewal. This is true for the political as well as economic future of the country. Indeed, the economy is in need of fresh air. A new Lebanese lira could stimulate the economy and fulfill positive expectations as a new symbol of societal trust and value creation. Today, the Lebanese use liras for small transactions, like buying vegetables, and use US dollars for large transactions, like buying and selling their own land. A close look at dollarization levels reveals some interesting yet very worrisome facts. Lebanon is a partially dollarized economy. The simplest dollarization measure is the ratio of deposit dollarization. Deposit dollarization is calculated as the share of total deposits in foreign currency (FC deposits/Total deposits). This ratio was 70% in early 2005. The ratio increased immediately after the assassination of former Prime Minister