July 22nd, 2020, will be remembered as the day Lebanon made it into the Hanke-Krus World Hyperinflation Table after its inflation rate exceeded 50% per month over a period of 30 consecutive days.
This makes it the first MENA country to ever experience hyperinflation, according to expert Steve Hanke, a professor of Applied Economics at the Johns Hopkins University.
Lebanon is following in the tracks of Venezuela, the only other country experiencing ongoing hyperinflation at the moment.
Prof. Hanke points the blame to a risky game played by the Lebanese government, the central bank, and “savers.”
He has been proposing a solution to Lebanon’s problem. If Lebanon follows it, it would “establish confidence and stability immediately,” he asserted.
Prof. Hanke advised that Lebanon adopt a USD-back currency board if it ever wants to get out of this crisis.
“A currency board is a monetary institution (or a set of laws that govern a central bank) that issues a domestic currency that is freely convertible at an absolutely fixed exchange rate with a foreign anchor currency,” he explained.
“With a currency board, the local currency is simply a clone of its anchor currency.”
– Prof. Steve Hanke
Local economic specialists think otherwise, saying that Prof. Hanke just wants to promote his “currency board” solution as a “foolproof” cure for all.
But Prof. Hanke says adopting a currency board is the best way to get immediate support from the IMF. And it’s an IMF deal that Lebanon desperately needs.
The question is, will money solve Lebanon’s deep-rooted corruption problems?