Lebanon’s battle for sovereignty must extend to its banks

The International Monetary Fund and World Bank Annual Meetings recently convened in Bangkok, where Lebanon's representative grappled with a question far more significant than any bailout: can the state regain control over both power and finance? While Hezbollah's private arsenal has historically operated independently of state authority, sovereignty in the modern era hinges on the government's capacity to manage finances, safeguard savings, generate revenue, provide credit, and uphold the rule of law.

Consequently, economic reform must be an integral part of Lebanon's sovereignty discourse, rather than an afterthought. This issue has now come to the forefront of the IMF's agenda. Nearly seven years after Lebanon's financial collapse, depositors continue to bear the brunt of the crisis they did not cause. Over $70 billion (Dh257.07 billion) in losses have accumulated across the state, central bank, and commercial banks, while the question of who should bear these losses remains unresolved.

As a member of Parliament, I have witnessed this debate unfold within our institutions for years. Although Parliament approved the amended Bank Resolution Law in August, this progress should not be conflated with domestic consensus, as reform-oriented officials remain in the minority within Lebanon's power structure. Recent advancements have largely been a result of external pressure from the IMF and other institutions.

Prime Minister Nawaf Salam has been among the few senior officials advocating for a genuine commitment to reform and readiness for an IMF program. However, President Joseph Aoun recently referred article 3 of the law to the Constitutional Council, reigniting a dispute over the central bank's powers, which casts further doubt on Lebanon's reform message.

The next hurdle is the Financial Stabilisation and Depositor Recovery Law (or Gap Law), which will determine how losses are distributed and how depositors are treated. This challenge is as much political as it is technical. The Lebanese banking lobby, spearheaded by the Association of Banks in Lebanon, remains a formidable organized interest, wielding significant influence through political allies in Parliament, including within the Finance and Budget Committee.

From experience, I am aware of the pressure exerted by this lobby, not only within Parliament but also through political and media influence, shaping restructuring, loss allocation, and shareholder accountability. Furthermore, delay in addressing these issues has security implications. Lebanon's dollarized cash economy is vulnerable to instability if not managed effectively.