Overview of the Recent Monetary, Banking, and Financial Developments in Lebanon
2024

In 2024, Lebanon remained entrenched in the prolonged economic crisis that began in 2019, with the compounded effects of regional conflict, political paralysis, and institutional fragility continuing to weigh heavily on the country's socioeconomic fabric. The cumulative contraction of GDP has surpassed 40% since the onset of the crisis, as the local currency lost over 98% of its value and inflation further eroded purchasing power, deepening poverty and widening inequality.

The outbreak and escalation of conflict between Lebanon and Israel in late 2023, followed by a 13-month war, inflicted substantial human and economic losses. Updated World Bank estimates indicate that the toll on the population has been devastating, with over 3,500 lives lost, more than 14,500 injured, and nearly 1.2 million people displaced.  Physical damages were estimated at USD 6.8 billion and economic losses at USD 7.2 billion—together amounting to more than half of Lebanon’s GDP.

As per Banque du Liban (BDL)’s figures, real GDP contracted by an estimated 6.4% in 2024, marking another year of economic stagnation and decline across key sectors, particularly agriculture, commerce, and tourism. Yet, the fourth quarter of 2024 brought a glimmer of hope with the implementation of a ceasefire, political breakthroughs, and signs of renewed engagement on the reform front. Average annual inflation decelerated significantly to 45.2%, supported by exchange rate stabilization since August 2023. Despite ongoing vulnerabilities, these developments may pave the way for gradual stabilization in the period ahead.

At the monetary level, stability remained a key characteristic of the year in spite of the severe economic disruptions caused by the 2024 conflict. The Lebanese pound held steady throughout the year, fluctuating only marginally around LBP 89,600–89,700 against the US dollar, even amid intensified pressures during the last quarter. This was made possible by BDL’s continued implementation of orthodox monetary policies, including strict control over money supply and the cessation of government funding.

BDL’s foreign currency reserves also posted a net increase of USD 814 million over the year to reach USD 10.135 billion by the end of December, although the final quarter saw a decline due to extra disbursements for depositors under BDL circulars No. 158 and 166. These payments were targeted to meet the market demand for US dollars during the war period. The average currency in circulation outside BDL dropped to LBP 57.6 trillion in 2024, down from LBP 67.4 trillion the previous year, reflecting continued monetary tightening. These monetary outcomes were further supported by a near-balanced fiscal stance and a balance of payments surplus over the first ten months, underscoring the relative resilience of monetary conditions in the midst of exceptional pressures.

At the banking sector level, overall activity continued to decline amid persistent economic challenges. Since the onset of the crisis in late 2019, the sector has been undergoing a significant contraction in both deposits and loans, reflecting its ongoing adjustment in response to the broader economic context. Over the past five years, customer deposits have shrunk by more than half reaching USD 88 billion by the end of 2024, with a deposit dollarization ratio of 99.1%. This was mainly driven by resident withdrawals of local currency deposits, partial disbursements of foreign currency deposits under BDL circulars, and loan settlements through bank checks, particularly during the initial phase of the crisis.  Additionally, this contraction is linked to the payment of taxes, fees and various bills via banking channels.

In parallel, Lebanese commercial banks have undergone substantial deleveraging since the crisis began, with their loan portfolios shrinking substantially due to early repayments and loan redemptions, to reach USD 5.5 billion at the end of December 2024. Consequently, the loan dollarization ratio surged to 97.7%. Notably, loan settlements have been the largest contributors to deposit contractions over the past five years, while banks have stopped granting new loans to individuals and businesses.

In terms of capitalization, banks’ capital accounts witnessed a modest decline over the past year, with total shareholders’ equity dropping by 5.3% to reach USD 4.8 billion at the end of December 2024.

Alongside these developments, BDL undertook several regulatory measures in 2024 to strengthen Lebanon’s anti-money laundering and counter-terrorism financing (AML/CFT) framework, in line with the country’s commitments under the Financial Action Task Force (FATF) process. In February, BDL amended the System for Monitoring Financial and Banking Operations to enhance controls on corruption and bribery, requiring banks to establish dedicated compliance units tasked with detecting and preventing such offenses. Moreover, in June, BDL issued a circular requesting banks, financial institutions, and other licensed entities to submit updated information on shareholders, board members, and senior executives for periodic cross-checking against local, international and UN sanctions lists.

These actions were part of Lebanon’s broader efforts to address strategic deficiencies within agreed time frames under its agreement with the FATF. However, the grace period concluded with Lebanon failing to implement 21 Key Recommended Actions and only partially implementing 25 others. Consequently, Lebanon was placed on the "List of Jurisdictions Under Increased Monitoring – Grey List" by the FATF on October 25, 2024. 

In conclusion, the Central Bank of Lebanon remains committed to safeguarding monetary and financial stability amid unprecedented challenges. In the face of regional conflict, institutional paralysis, and sustained socioeconomic strain, BDL has maintained disciplined monetary policy, reinforced its foreign reserve buffers, and implemented targeted regulatory measures in line with international standards. While Lebanon’s placement on the FATF grey list highlights the urgency of broader institutional and governance reforms, BDL’s continued efforts to enhance transparency and supervisory effectiveness provide a critical foundation for restoring confidence. Going forward, Lebanon’s path to recovery will require bold political decisions, structural reform, and effective coordination between fiscal and monetary authorities to achieve sustained stability and inclusive growth.