Financial Times: Lebanon Considers Selling Gold Reserves to Save Banks and Economy

SadaNews - The British newspaper "Financial Times" reported that politicians and bankers in Lebanon are considering the possibility of selling or leasing part of the central bank's large gold reserves to save the country from the repercussions of its economic and financial crisis, especially amid rising global gold prices.

Lebanon is trying to emerge from a suffocating economic crisis that has been going on since 2019, but selling the country's gold reserves is a "unpopular" idea, according to the British newspaper, as many Lebanese believe it would benefit a few at the expense of the majority of the population.

Ahmad Zidan, the owner of a cooking gas cylinder shop in Beirut, told the British newspaper, "Our leaders have stolen the country.. do not sell the gold but return the money you have stolen."

Large Reserves

The Lebanese central bank possesses relatively large gold reserves, considering the small size of the country, having 280 tons of gold, which is the second-largest reserve in the region after that of Saudi Arabia.

Lebanon began building its gold reserves in the 1940s and 1950s to support the value of the Lebanese pound.

The price of gold has risen by 70% over the past year, reaching about 5,000 dollars per ounce, meaning that the value of Lebanon's gold reserves is approximately 45 billion dollars in 2026, which equals more than half of the financial losses of Lebanese banks.

However, Lebanese law prohibits the sale or leasing of the country's gold reserves, which means that parliament will need to issue legislation allowing this move.

Banking Crisis

One of the reasons for the financial crisis Lebanon has faced is that the central bank provided a high interest rate on dollar deposits for Lebanese banks, which in turn offer high interest to depositors, in an effort to maintain dollar deposits.

Depositors' dues with Lebanese banks have accumulated to about 70 billion dollars, which they have been unable to pay back, and the state does not have the financial capacity to intervene to assist.

Lebanon is seeking to pass a law for the recovery of bank deposits, which is a necessary condition for reaching an agreement with the International Monetary Fund that would allow Beirut to obtain loans and necessary credit facilities for economic reform.

Lebanon has not been able to meet the conditions set by the IMF to obtain its loans since the beginning of the financial crisis in 2019.

Deposit Recovery Law

The Lebanese Council of Ministers approved a draft law for the recovery of deposits a few weeks ago, aimed at addressing the financial crisis that has shackled the local economy for six years, and it requires parliamentary approval of the Cabinet's decision.

Although the draft law excludes the use of gold, some analysts believe it will ultimately become part of the solution.

The simple reason is that the central bank does not have the necessary liquidity to meet its obligations under the new law and has no choice but to sell or lease some of its gold reserves, especially since the IMF does not oppose this idea.

Lebanese financial expert Mike Azar criticized politicians in an interview with the "Financial Times" for not disclosing plans to sell the gold reserves, saying, "If they plan to use gold, they should say so, but do not pass a law that can only be implemented by selling gold."

The newspaper quoted one Lebanese banker in favor of selling part of the gold saying that banks have not publicly made such proposals because they do not want to provoke the anger of the Lebanese people any further.

Source: Financial Times