Lebanon reviews $16.5 billion dispute as depositors await clarity on their funds

Report by Lea Fayad, English adaptation by Yasmine Jaroudi 

Lebanese depositors seeking to know how much of their savings they might recover may find the answer tied to the country’s ongoing $16.5 billion financial dispute, and to who will ultimately bear its cost.

According to the Banque du Liban (BDL), the $16.5 billion represents funds it spent on behalf of the state over the years to cover dollar-denominated expenses. BDL now insists the government must repay that amount so it can, in turn, return depositors’ money.

However, the Finance Ministry refuses to recognize the debt, arguing that it neither acknowledges the obligation nor has the means to repay it. 

Meanwhile, the International Monetary Fund (IMF) is also reluctant to see Lebanon’s public debt increase, preferring instead to reduce the government’s liabilities before extending any new financial support.

The standoff poses a serious problem: if the state refuses to assume the debt, leaving it on the BDL’s books, the burden could fall primarily on depositors, meaning deeper haircuts on their savings and longer delays in repayment.

In response, the BDL and the Finance Ministry have agreed to launch a comprehensive audit of the $16.5 billion to verify its source and legitimacy. 

At the same time, banking sources say BDL is pressuring commercial banks to raise their capital and absorb a larger portion of the losses to prioritize small and medium-sized depositors.

These measures follow the BDL’s proposal to the government, outlining how deposits could be repaid and losses distributed more fairly. The two sides are currently in talks to refine the plan as the government prepares its own financial recovery strategy.

The recent steps come ahead of Lebanon’s participation in the IMF’s annual fall meetings in Washington next week, where the country is expected to face renewed scrutiny over its stalled economic reforms.