Many would be surprised that Lebanon has the second-largest gold reserves in the Middle East, behind only Saudi Arabia. It is estimated to be 286.8 metric tonnes, worth approximately US$45-46 billion, given recent gold prices of US$5,000 per ounce. Yet Lebanon remains one of the most heavily indebted countries in the world, with a debt-to-GDP ratio among the highest. The severe fiscal crisis in late 2019 led to the collapse of the banking system. The country suffered a nearly US$70 billion loss in its financial sector, further aggravated by billions of dollars lost due to the war between Israel and Hezbollah in 2024. A shortage of foreign currency, systemic mismanagement, frozen assets, and currency collapse have devalued assets, including bank deposits. Many people lost access to their bank deposits and turned to cash transactions, which led to the growth of parallel financial networks and informal cash systems, some linked to Hezbollah and other political groups.
The new government formed in February 2025 was negotiating a reform package with the IMF, which requires the government to maintain a low public debt level to reduce its lending risk. Recently, a draft law was introduced to create a legal framework for restructuring the banking sector and to allocate about US$70 billion in crisis-related losses among the state, the central bank, Banque Du Liban (BDL), and the commercial banks. It sets out rules for reimbursing depositors and a mechanism to restore financial stability and confidence in the banking system. The bill is key to unlocking the IMF bailout and promoting economic recovery.
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However, it has polarised the country's debate over who should bear the greatest losses: the government, the central bank, or the commercial banks. Small account holders would be reimbursed in cash over four years, while those with larger accounts are meant to be compensated with long-term government securities, which some view as penalising large depositors and being unfair. To keep public debt lower for IMF lending, the government plans to delay payments of about US$16-17 billion on its Central Bank debt. The government’s delay in paying central banks could tighten liquidity in the banking system, affecting credit lending, and continue to block Lebanese from accessing their legitimate bank deposits.
Some policymakers have proposed that the central bank sell some of its gold reserves to tackle liquidity shortages. However, this is easier said than done. According to Law No. 42/1986, BDL needs explicit parliamentary approval before selling gold reserves. In a parliament deeply divided along sectarian and political lines, any vote to sell gold would require a parliamentary majority, cross-party consensus, and political willingness to accept responsibility in the current fragile and sensitive environment. Additionally, varying interpretations of the law could arise due to the monetary and sovereign implications of selling gold. This might lead to calls for a broader mandate through a special or qualified majority rather than relying on a simple parliamentary majority.
Even with parliamentary approval, operational challenges would include international legal and logistical hurdles. Roughly 33-40 per cent of Lebanon’s gold is reported to be held by the Federal Reserve Bank of New York. While it benefits from protection under the Foreign Sovereign Immunities Act of 1976, liquidation poses some litigation risks from Lebanon’s private creditors, especially as the proceeds pass through the US financial system and can be argued to be used for a commercial purpose. Additionally, physically transferring and liquidating gold would involve legal and jurisdictional complexities. Reducing Lebanon's gold reserves on its balance sheet could impact perceptions of its future economic resilience and, consequently, its credit ratings.
Deciding to sell gold held in Beirut would be equally difficult in a deeply divided parliament. Selling off the country’s gold raises fears of political opposition and public backlash. After the 2019 banking collapse that froze deposits, citizens worry that the proceeds from the gold might be mishandled and that political elites could take the profits.
Gold reserves are often regarded as a country’s ultimate sovereign asset and a safeguard for monetary stability. Politically, selling them is often described as ‘selling the family silver’. When a country is facing a severe banking and financial crisis—with frozen deposits and low public confidence—any decision to sell its gold assets carries substantial psychological and political risks. Without credible, strong safeguards within a comprehensive restructuring plan, selling gold can be perceived as a sign of fiscal desperation. This may trigger panic and speculation, increase currency pressures through capital flight, expand parallel currency markets, and accelerate currency depreciation, which can worsen the banking crisis and undermine the goal of gold liquidation. As the saying goes, the solution can be worse than the problem.
The author teaches at the Centre for West Asian Studies, Jawaharlal Nehru University, New Delhi.
