Spending to Save

Lebanese coins are not worth their weight in metal anymore. In the most recent sign of the country’s increasing economic woes, Lebanese have begun melting lira coins down for scrap. On the other end of the spectrum, Lebanese are pouring funds into luxury goods: Rolex watches, Mercedes cars, and even real estate. With their savings in U.S. dollars trapped in Lebanese banks, many Lebanese have come to believe that the easiest way to save money in Lebanon is to spend it.

Amid the lira’s plummeting value , collapsing foreign reserves, and fears of country-wide bank runs, Lebanese financial institutions capped monthly withdrawals of U.S. dollar deposits from Lebanese banks in October 2019 before eventually cutting them off completely in April 2020. Lebanese could still withdraw their funds, but only as liras converted at the official exchange rate, which is a fraction of the market rate . Lebanese banks have essentially held depositors’ dollars—now derisively referred to as “ lollars ”—hostage, effectively demanding a high fee for releasing them to their owners.

With no faith in Lebanese banks, the future value of the lira, or the safety of dollar deposits, Lebanese have taken to investing in tangible assets. Many luxury goods sellers have adopted a cash-only or a half-cash, half-lollar policy. Other parties have embraced the emerging lollar culture. A Lebanese filmmaker recently launched a campaign to urge people to invest in the film industry, acknowledging Lebanese would lose money when they withdrew their funds but promising they would earn profits in foreign currencies and thus have “fresh” dollars to spend as they wished.

Last week the Lebanese central bank launched a new platform, dubbed Sayrafa, that is intended to allow Lebanese to access their lollars at a rate close to the market rate. There are more questions than answers about how it will operate, though, and it remains unclear how it will access sufficient dollars given the strong demand for them.

For the foreseeable future, Lebanese may continue to act as they have been doing, believing a lollar spent is a dollar earned.

This article is part of the CSIS Middle East Program series Mezze: Assorted Stories from the Middle East.