Lebanon's financial fix: Could a deposit write-off reshape the economy?

Report by Bassam Abou Zeid, English adaptation by Yasmine Jaroudi

Lebanon is facing a financial gap of $81 billion, arising from deposits held by banks at the Banque du Liban (BDL), which in turn owes the state, while the state has already spent the funds. 

BDL's total reserves, including liquidity, gold, and other assets, currently stand at around $50 billion.

BDL is reportedly considering writing off up to $34 billion in deposits it considers illegitimate or artificial. These include funds linked to check trading, high-interest payouts, and transfers from Lebanese lira to U.S. dollars following the financial crisis.

If implemented, the write-off could help balance the gap with BDL's existing reserves and gold holdings. 

However, this would not restore the deposits to account holders, as recapitalizing BDL would remain the responsibility of the state, a significant challenge given Lebanon's fiscal constraints.

Additionally, an estimated $12–14 billion of deposits were lost to subsidy programs. 

Authorities are exploring recovering part of these funds through a tax on profits earned by subsidy beneficiaries. Yet, the effort faces political obstacles, as influential political groups back many beneficiaries.