Lebanon Bets on Central Bank to Restore Depositor Confidence

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Lebanon’s economy minister Amer Bisat said the country’s central bank has sufficient assets to support a long-awaited plan aimed at repaying depositors whose funds have been locked in the financial system for years. According to Bisat, liquidity and returns generated from central bank assets could allow repayments not only to small depositors, but also, over time, to larger ones.

The plan, approved by the cabinet in late 2025, would allow depositors to claim up to $100,000 over four years. Amounts above that threshold would be converted into bonds backed by central bank assets, marking a structural approach to burden-sharing rather than an immediate cash settlement.

A step toward rebuilding a broken banking system

The proposal is widely seen as a critical step toward restoring confidence in Lebanon’s banking sector, which collapsed in 2019 following a sharp drop in capital inflows, the breakdown of the currency peg and a sovereign default on roughly $30 billion in international bonds.

Bisat said losses have been allocated across the central bank, commercial lenders, depositors and the state, with cash repayments for smaller depositors to be funded jointly by the regulator and local banks.

Gold reserves as a confidence anchor

Lebanon’s gold holdings, valued at around $40 billion according to central bank data, are not expected to be sold to fund repayments. Instead, they are positioned as a key confidence anchor for depositors and asset holders, reinforcing the credibility of the broader recovery framework.

Persistent economic and political headwinds

Despite easing inflation, which remains near 15%, Lebanon continues to face daunting challenges. Negotiations with the International Monetary Fund and holders of defaulted bonds are expected to be difficult, while regional security risks remain elevated.

Still, recent political shifts, including the formation of a more Western-aligned government and the weakening of armed factions, have helped spark a rally in Lebanon’s distressed bonds, even as they remain firmly in high-risk territory.

IMF talks and legislative hurdles ahead

Lebanon has resumed discussions with the IMF based on a staff-level agreement reached in 2022. Bisat described the talks as constructive, though no timeline for a full financing program has been announced. Parliamentary approval of the deposit restructuring law will be decisive, particularly given that earlier recovery plans, including one drafted by Lazard in 2020, failed to gain political backing.

Investor implications

According to International Investment analysts, Lebanon’s strategy prioritizes confidence restoration over immediate liquidity injections. For investors, the outlook remains highly speculative: meaningful reforms and IMF support could unlock upside in distressed assets, while renewed political deadlock or security shocks would likely derail the recovery narrative.