Lebanon’s Stabilisation and Deposit Repayment Act (FSDR) aims to resolve one of the most consequential financial collapses of modern times: how to compensate depositors trapped in the banking system since late 2019. But despite the significance of the legislation, a critical dimension of the problem remains insufficiently addressed—liquidity. The country’s economic crisis is not simply a matter of balance sheet losses or distributive politics; it is fundamentally a crisis of liquid capital. Without liquid assets, repayment plans risk remaining theoretical—numbers on paper that cannot translate into real cash flow.
A System Where All Parties Lack Liquidity
Today, every stakeholder—depositors, banks, corporations, and the state—operates in a liquidity desert. Banks are technically solvent on paper only because their obligations are priced at arbitrary conversion rates; corporates are unable to access working capital; depositors cannot withdraw; and the state lacks the fiscal breathing room to recapitalize institutions.
But among all these actors, the Central Bank stands alone as the only institution structurally capable of creating liquidity at present. The Banque du Liban (BDL) has assets, monetary mechanisms, and credibility channels that no individual commercial bank or private actor can replicate. Yet its strongest reserve asset—Lebanon’s gold—remains frozen in a paradox.
Gold: Capital-Rich, Liquidity-Poor
Lebanon is sitting on roughly USD 40 billion in gold holdings at current market valuations. As global uncertainty pushes gold prices higher, this asset base is appreciating. The state is, in theory, becoming “richer.” But capital appreciation is not liquidity. Gold stored in vaults generates no cash flow. It cannot be lent, invested, or deployed to provide working capital to muted economic sectors. The country, quite literally, is wealthy on paper and cash-poor in practice.
Current proposals to “rent out” the gold or issue tokens that can be “Staked”—effectively earning a modest lease rate from financial institutions—would produce yield on the order of 2–3% annually at best. That may suit a conservative sovereign wealth fund in a healthy financial environment, but it falls short of Lebanon’s urgent liquidity requirements. A state emerging from systemic collapse cannot sustain itself on token returns.
Converting a Fixed Asset Into a Liquid Engine
A more transformative approach would be to sell a portion of the gold—say USD 20–23 billion—while preserving a strategic reserve buffer. The proceeds should not be used for sovereign spending or fiscal patchwork, but instead be deployed by the Central Bank into risk-managed, investment-grade instruments: U.S. Treasuries and AAA-rated securities.
At an assumed conservative yield of 5% or so, such an investment portfolio could generate roughly USD 1.15 billion in annual cash flow for the central bank. Crucially, this would not be a one-off gain—it would establish a permanent liquidity engine.
That liquidity could then be channeled into banks as:
By doing so, BDL would—perhaps for the first time since the crisis began—act as a provider of liquidity rather than a destroyer of it.
FSDR: A Plan Without a Liquidity Strategy
The absence of a serious liquidity pillar in the FSDR renders the plan incomplete. The debate to date has been consumed by accounting theatrics: who bears losses, in what sequence, at which exchange rates, over what time frame. But numbers alone do not resolve a liquidity crisis.
As the Prime Minister’s remarks on television demonstrated, the political class still treats the problem as if it were a literary waiting game—a national “Waiting for Godot”, where each actor waits for someone else to solve the liquidity riddle. Time passes, positions harden, and nothing happens.
Meanwhile, the economy atrophies.
Liquidity Is the Name of the Game
If liquidity is not created—not theorized, not modeled, but created—then the FSDR risks being a replay of the last five years: a non-execution plan masking as reform. More dangerously, it risks forcing the financial system into a second default, this time not on Eurobond holders, but on depositors themselves.
Lebanon has already suffered a collapse. It cannot afford a sequel.
For the FSDR to hold credibility, it must incorporate a liquidity strategy. Without one, it is not a repayment plan at all; it is an extended deferral of insolvency.