- 05
- Mar
- 2025
Following the government’s policy statement and the president’s inaugural speech, it is clear that a new momentum is emerging to address the pending economic issues. Controversial proposals are emerging, notably the idea of using Lebanon's Central Bank gold reserves (BDL) to partially bridge the financial deficit. However, it is evident that an urgent liquidity injection is indispensable.
Liquidity Injection
The question of using the BDL’s gold is delicate and has sparked intense controversy. A significant portion of public opinion struggles to accept it, viewing it as "the untouchable treasure" or "the red line," while others see it as "the last resort solution."
Some suggest that liquidity could be generated by selling a portion of the central bank's gold assets. Others propose mortgaging them, ensuring that the funds raised are invested carefully and wisely, particularly in US Treasury bonds and shares of publicly listed companies with high ratings from international rating agencies.
BDL's Gold Reserves
The gold reserves of Lebanon’s Central Bank (BDL) are estimated at approximately 286.8 tons, or 9,222,437.73 troy ounces. Considering that these reserves are mainly made up of standard 400-ounce troy bars (about 12.44 kg), this would represent about 23,056 gold bars. The troy ounce, used to measure the weight of precious metals such as gold, platinum, or silver, is the standard unit of measure.
The reserves are partially stored in BDL's vaults in Beirut, while another portion is kept in secure locations abroad, notably at the Federal Reserve Bank of New York (FRBNY). According to available information, around 40% of BDL's gold is stored in the United States, approximately 3,707,703.13 troy ounces, while the rest, 5,514,734.6 troy ounces, is kept in Lebanon.
Fouad Zmokhol, president of the Lebanese International Businessmen's Movement (Midel), noted that the firm Alvarez & Marsal Holdings, LLC had estimated the value of BDL's gold holdings at nearly $15 billion in 2019-2020. "Today, after historic increases in the price of gold, their value has risen to nearly $27 billion, generating a gain of around $12 billion over five years," he said.
According to him, the Central Bank's reserves and assets have now exceeded $37 billion, divided as follows: $10.3 billion in foreign currency reserves and $27 billion in assets and gold revaluation. This makes Lebanon one of the wealthiest countries in financial distress, given that these $37 billion represent about twice its gross domestic product, which stands between $18 billion and $20 billion.
The most precious metals, including one-ounce gold bars, are considered highly liquid assets, even if they are not immediately convertible into cash like stocks or bonds traded on major stock exchanges.
Risky Bet
Opponents of selling or mortgaging the gold fear mismanagement of the resulting funds, recalling that the state has already spent more than $24 billion since 2019, without undertaking any reforms. Therefore, how can one consider squandering the gold, Lebanon's only true strategic wealth?
In the same vein, some believe it is still too early to debate the fate of the gold or other state assets. The more pressing issue—at once economic and political—concerns the distribution of financial losses among the state, the Central Bank, the banks, and depositors, along with the responsibility each party must bear.
The Ball in Parliament's Court
Article 42/1986 of Lebanese legislation strictly prohibits any use or disposition of BDL’s gold reserves without prior authorization from Parliament. It establishes absolute protection for these gold assets, stating that "by exception and notwithstanding any other provision, it is strictly prohibited to dispose of the Central Bank’s gold reserves, regardless of the nature of this disposition."
This law was enacted to prevent any attempt to sell, exchange, or use the gold reserves in order to preserve the financial stability of the country.
Comments