Lebanon Inflation Rate Surges to 211%, Economist Steve Hanke Recommends a Currency Board – Economics Bitcoin News

As political leaders in crisis-hit Lebanon bicker over positions in the yet-to-be-formed government, the country’s runaway inflation rate surged to 211% in May 2022, new data has shown. Economist Steve Hanke insists that a currency board is a solution to Lebanon’s currency woes.

Black Market for Fuel Driving Inflation

A report said that the May inflation rate rose to 211%, marking the 23rd straight time that the consumer price index has risen in Lebanon. The revelation of the latest inflation figure comes as the country’s politicians reportedly struggle to form a new government more than a month after parliamentary elections.

According to a National News report, the politicians’ failure to create a new government is delaying the implementation of key reforms that allow Lebanon to receive a $3 billion bailout from the International Monetary Fund (IMF). A note by Byblos Bank is also quoted in the report, which attempts to identify factors that could worsen the inflation situation. According to the note:

The inability of the authorities to monitor and contain retail prices … as well as the fluctuation of the Lebanese pound’s exchange rate on the parallel market and the gradual lifting of subsidies on hydrocarbons, have encouraged opportunistic wholesalers and retailers to raise the prices of consumer goods disproportionately.

According to reports, the bank also stated that the recent rise in inflation rates was due to the increase of fuel prices and smuggling imported goods. The report noted that transport costs have increased by 515 percent in 12 months. As prices increased by 468%, the highest price rise was in the healthcare sector.

Currency Board Recommendation

National News also states that Lebanon’s public debt is now over $100 billion. To access $11 billion pledged by donors last year, it must have a functioning government. This funding is only available after the necessary reforms have been completed.

Professor Steve Hanke, an economist at Johns Hopkins University, recently made a presentation in support of the idea. tweet that an IMF bailout is not going to stop what he called “Lebanon’s economic death spiral.” Instead of attempting to rescue a collapsed currency, Hanke recommends a currency board.

“Since Jan 1st, 2020, the Lebanese pound has depreciated 92% against the USD. The Mikati government won’t stop Lebanon’s economic death spiral with a flawed deal with the IMF. The only way for Leb to establish confidence & stability is to install a Currency Board,” the economist argued.

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Terence Zimwara

Terence Zimwara was a Zimbabwean award-winning journalist and author. He is a prolific writer on the economic woes of African countries, as well as digital currencies that can be used to provide an escape path for Africans.