Ali Zein al-Din wrote in Asharq al-Awsat:
The military developments and their repercussions, according to the information of a concerned financial official, contributed to granting Lebanon new deadlines extending initially until the fall meetings of the international financial institutions, to complete the legislation of the road map for restoring financial order and recovering deposits, including the desired reforms in the banking system, and in parallel with adhering to the requirements of combating money laundering, especially with regard to curbing the informal economy, closing institutions and channels for the passage of illicit funds, and addressing the cash flow by subjugating them. For the requirements of verifying the source to the beneficiary.
An exceptional development emerged that would affect subsequent deliberations in the parliamentary committees and the general body of the House of Representatives, after the IMF approved, in an updated report, describing the crisis that struck the banking sector as “systemic,” and equating it with similar crises that struck 13 countries around the world in the last ten years, starting from Angola in 2015, all the way to Vietnam in 2022, which will contribute to conforming the reforms and their responsibilities with the international description and emulating the rescue plans adopted in the countries’ experiences. Similarity.
According to the financial official, the IMF classification is expected to resolve the prolonged internal debates that led to the prolonged failure to adopt the integrated plan to emerge from the tunnel of financial and monetary crises and contain their living and social repercussions, as this is the only mandatory path to restoring confidence in the financial sector as a whole, and a gradual return to economic recovery, especially after the massive losses, both architecturally and economically, of successive chapters of devastating wars, the accumulation of which is estimated to be no less than $20 billion at the minimum.
Also, according to the financial official, this approach gains additional importance in light of the discussions related to the restructuring of the financial sector, especially the draft law on restoring financial order and recovering deposits referred by the government to the Parliament. “Recognizing the systemic nature of the crisis requires reconsidering some of the proposed approaches, in a way that ensures a more equitable distribution of responsibilities and burdens among the various parties concerned, and away from reducing what happened within a narrow framework and bearing the full consequences of the collapses on depositors and banks.”
This development in the international description of the nature of the crisis is consistent with the judicial review of the Shura Council more than two years ago, which concluded that Lebanon is not facing an ordinary banking crisis, but rather a systemic crisis, holding the state primarily responsible for the financial crisis, as a result of adopting a policy of borrowing from the Bank of Lebanon to finance the deficit in its budgets. This reading was renewed during a meeting between the President of the Republic, Joseph Aoun, and the Board of Directors of the Association of Banks, headed by Dr. Salim Sfeir, informing him of the readiness for the banks to bear their responsibilities and to participate in bearing the losses, within a context that does not turn reform into liquidation, or turn restructuring into an unfair burden on the sector and depositors together, which requires fairness in distributing responsibilities and burdens, ensuring the protection of depositors’ rights, and preserving the elements of the sector’s continuity.
Aoun stressed “the importance of reaching a fair and comprehensive solution to the banking crisis that satisfies everyone and preserves rights alike,” stressing the importance of reform without destroying or harming this sector, stressing that “it is the state’s duty to stand by the banking sector and reform and restructure it to preserve the economic situation and guarantee the rights of depositors,” and that “without a sound banking sector there will be no investments, and there will be no country.”
Priority, the Governor of the Central Bank, Karim Saeed, did not hesitate to announce his reservations about important aspects contained in the government project, stressing at the time, “The project needs further clarification and strengthening with regard to the state’s obligations. Considering the state is the final body that used these funds over many years, its contribution must be explicitly specified, measurable, legally binding, and coupled with a clear and reliable timetable.”
The Governor did not fail to address, in his interventions locally and externally, the dilemma of “distributing financial burdens and responsibilities between the state, the Bank of Lebanon, and commercial banks,” as well as the pivotal topics related to reducing the financial deficit by removing irregular claims, classifying deposits into clearly defined categories, and repayment operations through a mixture of cash payments and asset-backed financial instruments, in stages and within the limits of available liquidity.
The banks insist on obtaining their natural right to participate in the discussions that determine their fate, and to clarify their approach based on the interconnection of the goals of protecting depositors and the continuity of the sector, and to understand their observations included in their memorandum to officials, which concludes that “instead of a fair distribution of responsibilities, the draft law referred to the House of Representatives removed the state, which is primarily responsible for the gap, from any clear contribution to the losses. The project did not stop at that; it harmed the banking sector and depositors alike.”
In conclusion, the financial official points out that international experiences show that systemic crises, no matter how severe, can turn into a starting point for rebuilding more solid and modern financial systems if political will and serious reforms are available. Hence, the current stage appears to be an opportunity to reformulate a new economic and financial model that will restore Lebanon’s position and financial role in the region, and establish the foundation for restoring both internal and external confidence.
Joseph Farah wrote in Al-Diyar: In light of the war and the stressful circumstances resulting from it, there has been a lot of talk about the Central Bank’s reserve, especially after its decline and the fear of great pressure on it and on the exchange rate, and its impact on the ground. This crisis has prompted decision-makers to deliberate on proposed solutions, which vary between bad and good solutions, according to economic and financial expert Dr. Patrick Mardini, who believes that “currently imposing Capital Control on the fresh dollar is one of the worst solutions, while the best solution is to form a currency board that maintains the exchange rate and protects the lira from collapse.”
He says, “The Bank of Lebanon’s reserve in foreign currencies decreased by about half a billion dollars, between late January and April 2026, and therefore there is pressure on this reserve, which is the result of three factors: the first is the rise in the import bill, the second is the general budget deficit, and the third factor is the withdrawal of depositors’ funds in accordance with Circulars 158 and 166.”
He points out that “in the summer of 2023, the policy changed in Lebanon, and the Central Bank decided not to lend to the state in either pounds or dollars, which brought about financial discipline. The Lebanese government responded to it by producing a surplus in the general budget, that is, instead of taking money from the Central Bank’s fund, it began putting it in the fund, and this is what doubled the reserve from the middle of the year 2023 until January 2026, and it rose as a result from about 7 billion to approximately 12 billion, and this path allowed the bank to The Central Bank wanted to slightly increase the ceilings on depositors’ withdrawals, but when we entered the war, the data changed a little.” He continues: “What was new when we entered the war were two factors: the first was the external factor, i.e. the factor of the rise in oil prices, and this means that the price of everything we import will rise, first and foremost, of course, the oil bill, which is followed by a rise in transport prices, and not only transport, but also insurance prices on transporting ships, as a result of the presence of risks in maritime transport, and all of this led to an increase in the cost of shipping, and thus the price of any goods imported from abroad rose. He points out that “the third cost is that foodstuffs depend on fertilizers, which depend on Oil, as many industrial products actually need oil, which has led to an increase in the price of everything we import.”
He points out that “if this war period extends until the summer, the state’s revenues will decline much more, while its expenses will increase because in reality it is spending a lot of money on the issue of displacement and removing rubble.”
Regarding the solutions, he says, “There are bad solutions and good ones. In my opinion, Capital Control is one of the bad solutions, and in this situation we are going through, it is one of the worst solutions, as we cannot impose Capital Control on the fresh dollar, and it is one of the solutions being talked about. As for one of the other solutions being talked about, it is reducing payments to depositors, i.e. reducing the ceiling on withdrawals for depositors. As for the third solution, it is the collapse of the exchange rate of the lira, but there is a Lebanese consensus on not wanting a collapse of the exchange rate, in order not to repeat the experience. Previous years between 2019 and 2023.”
He believes that “these are the scenarios currently being proposed, and in my opinion they are bad scenarios, as there is a fourth scenario that must be seriously and quickly investigated, which is the establishment of a monetary council, which is a system that says that the lira must be covered 100% by the dollar, that is, every 89,500 lira has a corresponding dollar in the fund,” and he adds: “As for the second part, it says that all the fresh money that the commercial banks have placed in the central bank, he has no right to dispose of it, and he must keep it.” In the fund so that these banks can withdraw it when they need it.”
He concludes, “The presence of a 100% reserve for deposits and the lira protects us from the collapse of the lira’s exchange rate, protects us from capital flight, reduces pressure on the lira, and frees up foreign currency reserves, so that we can carry out whatever reforms we want. I believe that this council is the most appropriate and best solution, as it was being researched slowly, but now, with the pressure on the reserve, it must be accelerated and put on a hot fire.”
