structural changes to the monetary, banking and tax system

The primary issue facing Lebanon is the monetary and tax system, rather than Hezbollah and its weapons, corrupt politicians, or political instability from Israel and Syria. Addressing the monetary and tax system would resolve the other problems.

Structural changes to the monetary system are needed to address Lebanon's current challenges, should be implemented as follows:

1. End the pegged exchange rate of the Lebanese Pound (LBP) to the U.S. dollar. Declare the LBP an old currency and introduce a new national currency called the Lebanese Lira (LBL). This new currency would be digital-only, with a floating exchange rate to the U.S. dollar, and a single digital transaction tax on monetary transfers between different legal entities paid by the sender.

2. Allow market forces alone to determine the exchange rate of the Lira, with no central bank intervention to stabilize it. Unify the exchange rate by adopting the market rate as the official rate.

3. Within two months, swap all old LBP to digital LBL at a ratio of 200,000 LBP to 1 LBL. Require all businesses to have point-of-sale terminals for monetary transactions and prepare for the end of the dollar cash economy in 1 year.

4. Abolish the existing taxation regime in its entirety and replace it with a single levy: a 2% Automated Payment Transaction (APT) tax paid by the sender. this one sided flow tax would be applied to monetary transactions between different legal entities (person-to-person, person-to-business, business-to-business, bank-to-person, etc.).

Examples that are taxed:

You (individual) → friend (individual) = taxed

You → business (e.g., supermarket, landlord, utility company) = taxed

Business → another business (supplier payment, invoice) = taxed

Employer → employee (salary/wages) = taxed

Bank → person (interest payment, dividend) = taxed

Person → bank (loan repayment) = taxed

international transactions (via banks, money transfer firms, or crypto exchanges), regardless of whether the transfer is between different or same legal entities.

monetary transfers between different legal entities conducted on a crypto exchange.

crypto withdrawals to wallets

an individual, a business or any private legal entity paying a fine.

Examples that are NOT taxed (same legal entity):

You moving money between your own accounts (Bank A → Bank B, your own credit card account, online wallet, crypto exchange account etc.)

Business internal transfers (head office → branch, company to its own super fund)

5. embrace modern monetary theory. Cease all government borrowing, with the central bank of Lebanon authorized to create money at will and transfer such funds directly to the treasury department to meet government expenditures without fiscal limitation.

6. the government disregards IMF requirements and credit ratings, repays public debt in LBL using the current market exchange rate at the time of settlement to calculate amounts, and ends dependency on external capital.

7. sell all gold reserves in the US for USD cash then transfer the funds to the central bank reserves. use the USD reserves to repay depositors with accounts less than 100,000 USD in USD. as for large depositors, whatever USD reserves remain would be distributed among them equally while paying the rest of the funds in LBL using the current market exchange rate at the time of settlement.

8. Invite cryptocurrency firms to invest in Lebanon and offer them banking license or electronic payment service provider license in return. on these exchanges, implement the 2% APT on all transactions from/to a lebanese crypto wallet as well as crypto withdrawals.

9. Make USD cash irrelevant and incentivize conversion to digital LBL. For every USD converted at banks or money transfer firms by individuals or non-financial firms/organizations, provide a 10% bonus in LBL. this bonus would be funded by the central bank.

10. USD accounts at the banks would have an automatic conversion when purchasing goods and services. this means buyer pays in USD and the merchant/receiver receives in LBL. this force conversion would create artificial demand for LBL.

11. The government issues a digital-only commodity-backed dollar, call it the lebanese dollar (LBD) with a fixed exchange rate to gold, silver, platinum, and palladium, fully backed by these precious metals. The exchange rate of the LBD to other currencies is determined based on the rate of silver in those currencies. The LBD is redeemable for the underlying precious metals. just like LBL transactions, monetary transfers of LBD are subject to the digital transaction tax. this hard currency is an incentive to drop USD to buy and hold LBD as it is backed by hard assets. The central bank mints LBD in an amount equivalent to the value of precious metal reserves held in Lebanon and sells LBD for USD cash. The purpose of this currency is to incentivize the private sector to sell their USD cash holdings for LBD while also receiving a 10% bonus in LBL on the value of the USD sold.

12. Implement a USD indexed system. Price all goods, services, government and private contracts, and salaries in USD, but require settlement in LBL.

13. Make money transfer firms the only channel for international transfers and bilateral trade settlements. embrace local currency trade settlement protocol and end dependency on the swift payment network. this means importer pays in their national currency while receiver gets paid in their national currency. this results with the lebanese importer no longer use USD for imports. restrict the use of the swift payment network strictly to crypto firms and electronic payment service providers while commercial banks are reduced to local firms who provide lending to the private sector.

14. Ban the central bank from buying and holding USD. strip the central bank from its power to lower or raise interest rates based on its objectives and replace them with these cold mathematical equations:

the highest interest rate on a private loan cannot exceed twice the CPI rate.

interbank lending rate = CPI rate + 1%

central bank rate (borrowing LBL from the central bank) = CPI rate + 2%

yield on savings account = CPI rate + 1%

Note that CPI rate would be calculated on a monthly basis and indexed in USD.

15. Bank laws: ban USD lending and borrowing. make all loans denominated in USD and require repayments in LBL according to market rate. the central bank would mint LBL funds worth of 20 billion USD and distribute them among all commercial banks equally on an annual basis as free money. this reduces dependency on private creditors.

George-Patrick Estephan