Depositors face delays as Lebanon battles over $16.5 billion debt

Report by Lea Fayad, English adaptation by Karine Keuchkerian

What’s the story behind the missing $16.5 billion between the state and the Central Bank of Lebanon — and how does it affect depositors?

In 2004, the Finance Ministry opened an account at the central bank to manage its dollar-denominated debt, or Eurobonds. This account recorded all the money the state borrowed and all the withdrawals it made.

Over the years, about $74 billion went into the account, while about $90 billion came out, according to available data. The $16.5 billion gap was covered by the central bank on behalf of the state.

This account appeared in International Monetary Fund (IMF) reports, but it did not show up in the central bank’s balance sheets until 2023. When the exchange rate began to climb, the figure appeared under “public sector loans,” first in the February 2023 balance sheet.

Today, the central bank is demanding the state repay the $16.5 billion, arguing the government is responsible for the spending and that the repayment is needed to return money to depositors.

The Finance Ministry, however, refuses to recognize the debt. It argues the value should be recorded at the time of the transaction, regardless of changes in the dollar’s value. It also says acknowledging the debt would inflate the deficit with an amount it cannot repay, and that the debt lacks legal approval from parliament.

The result: Depositors lose out. The state’s refusal to recognize the debt leaves the issue unresolved, meaning deeper losses and longer delays in recovering deposits. 

A forensic audit may be the only way to ensure depositors are not forced to bear the cost of reckless spending, lack of transparency, and systemic corruption.