“Akhbar al-Yawm” agency

Lebanon is Rich in Gold... Debate on Monetization Between Opposition and Support  

Financial Expert: Allocating Gold Overseas or Capitalizing on Price Fluctuations Does Not Mean Undermining Reserves

Lebanon is rich in gold, according to the latest report issued by the World Gold Council in February. The report revealed that Lebanon ranks second in the Arab world and twentieth globally among countries with the highest gold reserves, holding 287 tons, equivalent to approximately 10 million ounces. One-third of Lebanon’s gold reserves are stored in Fort Knox, under U.S. protection, while the remaining two-thirds are kept in the vaults of the Central Bank of Lebanon in Beirut.

In the same context, a study conducted by Dr. Garbis Iradian, Chief Economist at the Institute of International Finance, showed that Lebanon ranks first globally in gold reserves as a percentage of GDP, reaching 76.5%, the highest worldwide. This is attributed to the increase in Lebanon’s gold reserves to $27.002 billion, coupled with projections that Lebanon’s GDP will reach approximately $35 billion in 2025.

Meanwhile, gold prices continue to surge globally, reaching a record high today of $3,052.92 per ounce. This sharp increase follows signals from the U.S. Federal Reserve suggesting a potential interest rate cut of 50 basis points by year-end, enhancing gold’s appeal amid ongoing geopolitical and economic uncertainties.

The proposal to monetize Lebanon’s gold reserves as a means to repay bank deposits has resurfaced, reigniting a debate between two opposing perspectives. The first firmly rejects any gold monetization, while the second advocates for placing the issue on the table to explore potential financial solutions.

Supporters of the first stance emphasize the strategic importance of maintaining gold reserves, as they continue to provide a measure of confidence in Lebanon’s financial stability. They express concerns over the risk of mismanagement or depletion, recalling that Lebanon’s gold accumulation was largely attributed to the late President Elias Sarkis. As Governor of the Central Bank of Lebanon (BDL) in the 1960s, Sarkis acquired five million ounces of gold for the Treasury, securing Lebanon’s position among gold-holding nations. Successive governments continued to expand the central bank’s gold reserves until the early 1970s, when U.S. President Richard Nixon’s decision to abandon the gold standard halted the practice, following increased global demand for gold.

Opponents of gold monetization argue that sovereign debt obligations should be borne by the government, rather than being shifted onto future generations, whose only remaining national asset is Lebanon’s gold reserves.

A banking expert, speaking to “Akhbar Al-Yawm” agency argues: "Gold reserves exist to be utilized in times of crisis, and there is no greater crisis than the one Lebanon is facing today. While the Banque du Liban (BDL) lacks the liquidity to repay bank deposits, it still holds approximately $10 billion in foreign exchange reserves and over $30 billion in gold reserves.

The expert criticized the pretexts used to justify defaulting on deposits or repaying them in installments, emphasizing that the current gold proposal does not imply reckless disposal of reserves. Instead, part of the gold could be invested internationally, allowing BDL to earn returns that could be used to repay deposits, rather than continuing to pay storage and custodial fees for the reserves. Additionally, Lebanon could capitalize on the price appreciation of gold since 2019, partially monetizing the gains to settle depositors' claims.

The expert further questions those advocating for preserving gold to maintain confidence and safeguard future generations:

"Has gold prevented Lebanon from being placed on the Financial Action Task Force (FATF) gray list or from receiving negative ratings by international credit agencies? What will be left for future generations if the current generation is financially wiped out?"

He concludes by acknowledging that while not all Lebanese are depositors, everyone benefited from past financial policies, including subsidized loans and easy credit when the exchange rate was fixed at 1,500 LBP per U.S. dollar.