---
title: "The Israeli Aggression and Banque du Liban's Reserves | Ghazi Mahmoud"
url: https://ghazimahmoud.com/en/articles/2024-11-20-703c38/
lang: en
description: "At a time when it is difficult to estimate the value of the losses, both direct and indirect, suffered by the national economy as a result of the barbaric Israeli aggression against Lebanon, the statement of financial position, or what is known as the bi-monthly balance sheet, for the first half of October issued by Banque du Liban showed a decline in its foreign currency reserves of more than 341 million US dollars."
---

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# The Israeli Aggression and Banque du Liban's Reserves

[Brig. Gen. (Ret.) Dr. Ghazi Mahmoud](https://ghazimahmoud.com/en/about/)

20 Nov 2024 · 6 min read

[Banking and money](https://ghazimahmoud.com/en/articles/money/)[The Lebanese economy](https://ghazimahmoud.com/en/articles/leb/)[Politics and security](https://ghazimahmoud.com/en/articles/geo/)

At a time when it is difficult to estimate the value of the losses, both direct and indirect, suffered by the national economy as a result of the barbaric Israeli aggression against Lebanon, the statement of financial position, or what is known as the bi-monthly balance sheet, for the first half of October issued by Banque du Liban showed a decline in its foreign currency reserves of more than 341 million US dollars. This was followed by a further decline, albeit at a slower pace, recorded in the balance sheet for the second half of the same month of more than 92 million dollars, bringing their combined total to over 433 million US dollars.

Contrary to claims that the decline in Banque du Liban's foreign currency reserves was caused by supporting the stability of the exchange rate, a review of Banque du Liban's payments and transfers shows that the reason for this decline was the implementation of the Banque du Liban circular mandating the payment of three installments for October to depositors benefiting from Circulars 158 and 166, which pertain to withdrawals from US dollar deposits, amounting in value to no less than 180 million US dollars.

Another reason for the decline was Banque du Liban's coverage of approximately 150 million dollars arising from differentials in public sector salary and wage increases paid at the beginning of this November. Meanwhile, the cost of withdrawals under the two aforementioned circulars for November fell to 120 million dollars as a result of reducing the number of withdrawals to two.

By contrast, the decline in Banque du Liban's foreign currency reserves during the first half of November was limited to slightly more than 66 million US dollars, according to the bank's balance sheet, confirming Banque du Liban's continued control and ability to offset the bulk of its foreign currency payments. Meanwhile, the total amount injected into the markets by Banque du Liban during October and November reached approximately 570 million dollars.

Notably, these reserves had experienced a limited decline last June, falling by around 22 million US dollars to leave remaining reserves at approximately 10.11 billion US dollars. Conversely, Banque du Liban's foreign currency reserves had been increasing steadily since August 2023 by nearly 2.1 billion US dollars, reaching more than 10.8 billion dollars at the end of September, as a result of the measures taken by the acting governor of Banque du Liban and the decision to refrain from financing the government.

It is worth noting that public sector deposits derived from public revenues deposited into the state's accounts at Banque du Liban, particularly Account 36, help bolster the bank's foreign currency assets, especially following the adoption of fee payments in US dollars, alongside the purchasing operations carried out by the bank. Consequently, the decline in these reserves stems from the coincidence of due payments for salary and wage differentials, in addition to the increase in the value of withdrawals under the two circulars, on the one hand, with the repercussions of the Israeli aggression against Lebanon and the decline in public revenues on the other.

Yet although Banque du Liban managed to rebuild its foreign currency reserves at a high rate of nearly 24 percent and within a record period not exceeding one year, the total of these reserves remains below the value of the mandatory reserve that Banque du Liban is required to maintain under the Code of Money and Credit. Overlooking the enforcement of this legal obligation would not have passed were it not for the financial and economic challenges that prevented reaching the required reserve ceiling, and the priority given to preserving the stability of the Lebanese pound's exchange rate.

However, the decline in Banque du Liban's foreign currency reserves that began last October, albeit at a diminishing rate, raises the question of the bank's ability to continue rebuilding these reserves as the aggression persists, which it is feared will lead to a drop in collections and consequently to lower public revenues, even though the sector's deposits rose again according to the balance sheet for the first half of the current month.

External financial inflows, meanwhile, are experiencing a marked scarcity, and expatriates, whose spending is relied upon, are wary of coming to Lebanon today, as Lebanon has lost its summer season revenues while winter season revenues hang in the balance. Nor is the matter limited to the absence of tourists and expatriates; rather, since the eighth of last November they have been joined in the diaspora every day by new numbers of residents, most of them young people.

The question is not limited to rebuilding deposits alone, but includes the bank's ability to continue paying out deposits, which have become more urgent with the displacement of more than one million two hundred thousand displaced people, whose homes have been damaged and whose businesses have partially or completely come to a halt. This comes at a time when public spending is expected to rise to help meet the demands of this displacement, set against a scarcity of revenues in Account No. 36. That could prompt the government to ask Banque du Liban to finance public expenditure once again, consequently raising the question of the extent to which the acting governor of Banque du Liban can continue to adhere to the decision not to finance the state.

On the other hand, despite the importance of the monetary policies adopted by Banque du Liban and its governorship's commitment not to finance the state, the caretaker government must meet Banque du Liban with a fiscal policy that supports Banque du Liban's efforts to return deposits, broaden the base of beneficiaries, and strengthen the measures that restore investor confidence in the national economy. For monetary policies cannot replace fiscal policies or compensate for their absence; rather, monetary policy must be an expression of fiscal policy and integrated with it.

The wager remains on halting the Israeli aggression against Lebanon and achieving a permanent ceasefire as soon as possible, in order to limit the repercussions of the destructive war on people and property, and to prevent a doubling in the scale of financial requirements needed to compensate for them. After nearly fourteen months of aggression, there must be a solution that grants the state and society an opportunity to rebuild what has been destroyed and accelerates recovery at both the national and economic levels.

Concurrently with a ceasefire, the regular functioning of institutions must be restored, foremost among them ending the presidential vacuum, along with the state reclaiming its responsibilities in defending the nation's borders, maintaining security, and upholding the rule of law. For the interest of Lebanon and its resistance lies in a ceasefire, so as to preserve what remains of strategic and human capabilities rather than continuing to fight with whoever and whatever is left. Preserving Banque du Liban's reserves, just like safeguarding capabilities and confronting the financial and economic crises, requires political and security stability, which it is hoped has now come within reach.

Translated from Arabic with AI. [Read it in Arabic](https://ghazimahmoud.com/articles/2024-11-20-703c38/)

## Published in

- [Channel 23](https://ch23.com/Article/218302/العدوان-الاسرائيلي-واحتياطات-مصرف-لبنان)
- [OZ Arab Media](https://ozarab.media/العدوان-الإسرائيلي-واحتياطات-مصرف-لب/)
- [MTV Lebanon](https://www.mtv.com.lb/news/1520231)
- [Radar News](https://www.radar-news.net/العدوان-الإسرائيلي-واحتياطات-مصرف-لب/)
- [Lebanon Files](https://archive.lebanonfiles.com/2024/articles/باقلامهم/العدوان-الإسرائيلي-واحتياطات-مصرف-لب/)

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