Lebanon Just Made History With Its Hyperinflation
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.
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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," he briefed it in simple terms.
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?