BDL governor says giving priority to small depositors is a 'rational and necessary' option

The Banque du Liban (BDL) governor Karim Souaid said the country's complex economic crisis is in fact the predictable result of years of fiscal indiscipline, poor monetary management, and the misallocation of private sector savings into the banking system.

The governor pointed to recent government policy adjustments as a step in the right direction, noting improvements in public finances driven by increased tax collection and tighter spending controls. 

However, Souaid warned that these measures alone are insufficient to overcome the structural obstacles blocking recovery.

He emphasized that losses must be distributed among the primary stakeholders—the state, the central bank, and commercial banks—before any credible recovery path can emerge.

The governor also emphasized that prioritizing small depositors, who account for nearly 90% of bank accounts, is both an economically rational and socially necessary choice.

He added that rebuilding the banking sector will require either fresh capital injections or a significant downsizing to reflect economic realities, warning that any compromise solution risks prolonging stagnation.

Talks with the International Monetary Fund (IMF) are ongoing, Souaid said, describing them as intensive and potentially the last credible path to anchoring reforms and achieving sustainable recovery. He cautioned that Lebanon has limited room to impose counter-conditions.

Addressing the international community, the governor said the choice is clear: support a reform-oriented government now or delay assistance and risk a more fragile and unstable situation as the impact of the conflict deepens.

He warned that without a financial bridge, even well-designed reforms could be exhausted before delivering results.