Banque du Liban (BdL), Lebanon’s central bank, issued a circular this week calling for all money transfer offices (such as Western Union) to only pay out cash in Lebanese Pounds (LBP) rather than US dollars, even if the transfer was made in the US currency. This is the latest, and to date most worrying, sign of Lebanon’s deteriorating currency situation. The Lebanese currency’s long-standing peg to the US dollar (LBP 1,507 = $1) is under threat.

BdL Governor Riad Salameh...