The economic meltdown in Lebanon has led to a major shift towards a cash-based economy. With zombie banks freezing depositors out of their accounts, businesses and individuals have been forced to rely on cash transactions. Most restaurants and shops have now stopped accepting credit cards and are instead accepting U.S. dollars, with mobile apps being used to check on the rapidly declining value of the local currency.
Lebanon is also set to adopt a new official exchange rate of 15,000 pounds per U.S. dollar on Feb. 1, central bank governor Riad Salameh said, marking a 90% devaluation from its current official rate that has remained unchanged for 25 years.
The use of cash has had a significant impact on the country’s economy, with a twelve-fold increase in the amount of local currency in circulation between 2019 and 2022. This has led to a rise in crime and an increase in the sale of safes, with business owners documenting large transactions by taking pictures of the dollar bills used.
Despite the challenges faced by the Lebanese economy, some businesses are still struggling to adapt. Importers like Omar Chehimi, for instance, are facing difficulties obtaining letters of credit for large shipments.
The government has considered requiring traders to pay newly-increased customs tariffs partly in cash, but any recovery is dependent on addressing the losses in the financial system and restoring the banking sector. With politicians and bankers resisting reforms sought by the International Monetary Fund, the future of the country’s economy remains uncertain.
Since 2019 as Lebanon plunged into a financial crisis following decades of expensive wars coupled up with bad spending decisions, cryptocurrencies have become increasingly attractive as they operate outside the reach of bankers and politicians. Lebanon’s currency which has lost over 95 per cent of its value since August 2019 has meant that pensions and wages are almost worthless.