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3. Farewell to Wads of Cash: Lebanon Unveils Banknotes of LBP 500,000 and 1 Million

In Lebanon, where carrying stacks of bills of LBP 100,000 bills has become as routine as a morning coffee, the country is finally bidding farewell to bulging wads of cash. With the introduction of new LBP 500,000 and LBP 1 million banknotes, the days of oversized bags just to run errands are over. The aim? To streamline daily transactions. But behind this so-called “monetary revolution” lies a pressing concern: inflation. Will these new bills provide a genuine solution, or are they merely a slick distraction from an ongoing crisis?

After nearly six years of economic and financial turmoil, Lebanon has taken a long-anticipated step by issuing higher-denomination banknotes. Last Thursday, the Lebanese Parliament approved a draft law presented by MP Ziad Hawat, after nearly two years of legislative wrangling, granting the Banque du Liban (BDL) permission to issue notes of LBP 500,000, 1 million, 2 million and 5 million, along with new coins in denominations of LBP 1,000, 5,000, 10,000 and 20,000.

This move marks a significant shift, especially in a country where the Lebanese pound has lost about 98% of its value since the crisis began in 2019 and the economy remains in free fall.

The introduction of larger denominations aims to ease the burden on citizens who, in the face of hyperinflation, have been forced to carry piles of cash for everyday purchases.

Nassib Ghobril, chief economist at Byblos Bank, told This is Beirut that the issuance of these new notes are a direct consequence of the Lebanese pound’s devaluation, rampant inflation and the collapse of cashless payment systems like bank transfers and credit cards. He pointed out that Lebanon is not alone in this situation—many countries facing currency devaluation and economic crises are adopting similar measures. Ghobril views the introduction of these bills as a practical solution to facilitate transactions.

According to BDL statistics, Lebanon's total money supply currently stands at LBP 157.6 trillion, with 94% of that in LBP 100,000 notes, and 4.5% in LBP 50,000 notes. The remaining denominations—LBP 20,000, 10,000, 5,000 and 1,000 pounds—make up just 1.5% of the total in circulation.

Advantages or Risks?

The immediate benefit of issuing new banknotes is the simplification of daily transactions. Higher denomination bills and coins will reduce the number of notes needed for everyday purchases, benefiting the informal economy and small businesses, which often face the challenge of handling stacks of cash for relatively small amounts.

However, while simplifying payments may seem like a positive move, it also carries significant risks.

One of the main concerns is inflation. Although the issuance of new banknotes is not directly responsible for inflation, a lack of regulation over the money supply could worsen the already fragile economic situation. If the authorities fail to manage the money supply effectively and do not accompany this step with structural reforms, inflation could accelerate.

Nassib Ghobril reassures that the Banque du Liban (BDL) will introduce these new bills gradually and in a controlled manner. According to him, the central bank's goal is to maintain the current money supply, estimated at LBP 83 trillion. The economist adds that there is no risk of flooding the market with excess bills that would increase the money supply in circulation.

Furthermore, such a situation could lead to speculation over the exchange rate or trigger inflationary pressures.

Ghobril also anticipates that the BDL will carefully withdraw some of the smaller denominations already in circulation to stabilize the economy without causing further strain. However, failure to manage this money supply could exacerbate the existing economic problems.

The printing of these new bills will be carried out by the central bank with the assistance of specialized printing companies. Although the exact cost of the operation has not been disclosed, the production of these bills is expected to be costly due to the enhanced security measures required to prevent counterfeiting.

Issuing new banknotes in Lebanon, after years of crisis, is a necessary step to facilitate payments in a country where every day feels like an economic struggle. However, this move must not be seen as a mere cosmetic fix—it must be followed by substantial economic and financial reforms. Otherwise, the LBP 500,000 note could end up as just a pretty band-aid... on a gaping wound!