The collapse of Lebanon’s banking system, ongoing since October 2019, is one of the “worst economic crises globally since the mid-nineteenth century” (World Bank Group). It resulted in people losing access to their money overnight, the currency losing practically all of its value, and hardship spreading throughout the country (UPI).
According to the Barcelona Centre for International Affairs (CIDOB) publication, titled “Lebanon: Financial crisis or national collapse?”, the banking crisis consists of debt default, currency collapse, and significant bank collapses. During 2019, Lebanon defaulted on paying $1.2bn Eurobond (The Economist). The central bank, the Banque Du Liban (BDL), borrowed U.S. dollars from local banks to keep the currency stable and pay large deficits, which totaled “11% and 26% of GDP in 2018” (The Economist). The crisis deepened as “The central bank does not have enough dollars to repay what it owes” (The Economist). The collapse of the Lebanese pound also contributed significantly to the banking crisis. The U.S. Department of State (DOS) said that “Lebanon’s currency, the Lebanese pound (LBP), has lost more than 98 percent of its value since 2019.” As explained by Reuters, “Banks, central to the service-oriented economy, are paralysed. Savers have been locked out of dollar accounts or told that funds they can access are now worth a fraction of their original value” (Reuters 1). Lebanon’s $72 billion debt “is unrecoverable” (CIDOB) because the debt is stuck in the country’s banks (Reuters 2). This means that Lebanese depositors can only withdraw roughly $400 from their accounts each month (DOS). The combination of significant debt to the World Bank and others, currency collapse, and the banking system failure are what economists consider the fundamental cause of Lebanon’s financial crisis.
The seriousness of the problem has made international support essential in finding solutions. In March of 2025, the International Monetary Fund (IMF) visited Lebanon in order to assess and find possible solutions for this crisis. The team led by Mr. Ernesto Ramirez Rigo, who visited Lebanon, stated that the steps to recover and restructure the economic growth are to reform the governance and state-owned enterprise, as well as strengthen data provision to enhance transparency and reform policymaking (IMF). Given the substantial debt the Lebanese government owes its people, Tom Barrack, U.S. Ambassador to Turkey and Special Envoy to Syria, mentioned that Saudi Arabia and Qatar are prepared to assist and invest in an economic zone in Lebanon (AP News 1).
In April, the Lebanese government made a significant step by lifting the bank secrecy law, giving the central bank access to ten years of information. This allows the government “to uncover fraud, trace capital flight, and expose those who profited from the crisis” (UPI). Furthermore, to address the issue, Lebanon relies on the Financial Stability Law, which helps in mitigating losses and assigning responsibility to those who contribute to and exacerbate the country’s problems (UPI). Such efforts to promote financial openness have already resulted in actual legal action, including accusations against high-level authorities. As reported by the AP News, the government has found Former Economy Minister Amin Salam guilty of alleged financial crimes, and judicially, “A former Lebanese economy minister is arrested on corruption charges” (AP News 2). There has been a lot of public discontent regarding who will be able to solve the economic problem; however, “No one wants to bear responsibility: not the banks, nor the state, nor the central bank,” (UPI) said Nicolas Chikhani, an economic and banking expert (UPI).
Wissam Fattouh, Secretary of the Beirut-based Union of Arab Banks, said that “The Lebanese banking sector must reconnect with the international financial system, rebuild relationships with correspondent banks, regain access to global capital markets, and re-establish credibility” (Global Finance).
References
CIDOB: https://www.cidob.org/en/publications/lebanon-financial-crisis-or-national-collapse
DOS: https://www.state.gov/reports/2024-investment-climate-statements/lebanon
Global Finance: https://gfmag.com/economics-policy-regulation/lebanon-on-the-path-to-reform/
IMF: https://www.imf.org/en/News/Articles/2025/03/13/pr25062-lebanon-imf-staff-concludes-visit
Reuters 1: https://www.reuters.com/markets/rates-bonds/lebanons-financial-crisis-how-it-happened-2022-01-23/
The Economist: https://www.economist.com/middle-east-and-africa/2020/03/12/for-the-first-time-lebanon-defaults-on-its-debts
World Bank Group: https://www.worldbank.org/en/country/lebanon/overview