The International Monetary Fund and World Bank Annual Meetings took place in Bangkok last week. One participant from the Middle East – Lebanon – is confronting a question larger than any bailout: can the state recover authority over both force and finance?
Although Hezbollah’s independent arsenal has long denied the state full control over war and peace, sovereignty today also depends on the state’s ability to regulate finance, protect savings, collect revenue, extend credit and enforce the law. That is why economic reform belongs inside Lebanon’s sovereignty debate, not beside it.
That issue is now squarely with the IMF. Nearly seven years after Lebanon’s financial collapse, depositors are still paying for a crisis they did not create. More than $70 billion (Dh257.07 billion) in losses have accumulated across the state, the central bank and commercial banks, while the political question of who will bear them remains unresolved.
As a member of Parliament, I have watched that question move through our institutions for years. Parliament took an important step in August by approving the amended Bank Resolution Law. But this progress should not be mistaken for domestic consensus, as reform-minded officials remain a minority within Lebanon’s power structure, and recent gains have depended heavily on IMF and other external pressure.
Prime Minister Nawaf Salam has been among the few senior officials arguing that Lebanon is serious about reform and ready for an IMF programme. Even as he made that case, President Joseph Aoun referred article 3 of the law to the Constitutional Council, reopening a dispute over the central bank’s powers. Whatever the legal merits, the move cast fresh doubt on the reform message. The next battle is the Financial Stabilisation and Depositor Recovery Law (or Gap Law) which will decide how losses are allocated and depositors treated.
The challenge then is political as much as technical. Lebanon’s banking lobby, led by the Association of Banks in Lebanon, remains a powerful organised interest, which has sought to shape restructuring, loss allocation and shareholder accountability, drawing on political allies in Parliament, including within the Finance and Budget Committee. Having sat through these debates, I know this firsthand – and the pressure is not confined to Parliament. The banking lobby has repeatedly mobilised political and media influence to shape reform.
Delay also carries a security cost. Lebanon’s dollarised cash economy was estimated at about $9.9 billion in 2022, nearly half of gross domestic product. Not all cash activity is illicit, but at that scale the state loses visibility over financial flows, tax collection becomes harder and money-laundering risk rises. Hezbollah has long relied on cash, exchange houses, transfer networks and institutions outside conventional banking channels. Reuters recently reported that Hezbollah had received $200 million from Iran to assist displaced families, though the US State Department disputed the account. Whatever the exact figure, Lebanon cannot fully confront Hezbollah’s financing while opaque cash channels dominate and financial reform is delayed.
Lebanon cannot rebuild sovereignty while leaving either source of state weakness intact
Hezbollah and the banking lobby are neither allies nor equivalent. However, each exploits different forms of state weakness, leaving Lebanon less able to regulate money, enforce the law and command public trust. Treating Hezbollah’s weapons and financial reform as separate files, as has tended to be the case even in Washington, makes little sense: a state that cannot trace money, protect deposits, restore credit or finance businesses has fewer tools to compete with a parallel armed, financial and social system. Lebanon therefore needs both exclusive state control over arms and a financial system strong enough to sustain state authority.
The coming debate over the Gap Law will test whether Lebanon can put the public interest ahead of organised privilege. As an elected member of Parliament, my position is clear: ordinary depositors and taxpayers cannot again be asked to absorb losses while shareholders, insiders or those who benefited from the old system are insulated. Losses must be allocated transparently according to a credible hierarchy of claims, with accountability and a viable banking sector capable of extending credit again. That is why Bangkok matters. The IMF has made clear that an appropriate Gap Law is central to any new programme. The challenge is whether Lebanon arrives with a credible path to implementation or another reform package that is diluted at home.
Lebanon’s international partners, especially the US and the IMF, can bolster a serious reform programme, but the case for reform is Lebanese before it is international. Businesses need credit, citizens need access to their savings, and the state needs revenue and financial visibility. This is why Parliament and the government must deliver financial reform alongside exclusive state control over arms. Lebanon cannot rebuild sovereignty while leaving either source of state weakness intact.