BDL, MoF, and IMF
in dispute over $16.5 billion

How it is resolved will impact haircut on deposits

A long-simmering dispute over whether the Ministry of Finance (MoF) owes the Central Bank (BDL) $16.5 billion has emerged as a key obstacle to reaching a deal with the International Monetary Fund (IMF), underscoring the fractures at the heart of the financial crisis.

The divergence of three parties is over classification: BDL treats the $16.5 billion as a receivable debt, MoF calls it an illegitimate accounting artifact, and the IMF views it as an obstacle to sustainable debt restructuring. Adding to the controversy is the absence of a forensic audit that would clarify how the funds were spent and why the liability was not reported in public budgets before 2023.

BDL claims that the amount is a legitimate receivable, arising from Eurobond-related flows between 2004 and 2007, when $62 billion was deposited in a special account and $79 billion withdrawn by the government. The difference, according to the bank, is recorded in both BDL and Ministry of Finance ledgers, was later audited by KPMG and noted in IMF reports. BDL Governor Karim Souaid argues that the claim is a ‘commercial debt’ under Article 13 of the Code of Money and Credit, which BDL is legally bound to preserve. He says that the State must ultimately cover the central bank’s deficit, as stipulated by Article 113. BDL has suggested soft repayment instruments such as perpetual bonds with minimal yields, possibly tied to privatization proceeds. BDL says that should it be forced to write off the $16.5 billion, it will in turn have to forgo an equivalent amount from bank deposits at the Central Bank. These funds in turn will be haircut from depositors at banks.

The Ministry of Finance (MoF) rejects the figure outright. It calls it an “accounting invention” by the former BDL Governor, created when he retroactively reclassified state spending as debt to the central bank in early 2023. Yassine Jaber, Minister of Finance, warns that recognizing such a liability would saddle the country with debt equal to half its GDP, expose it to lawsuits from Eurobond holders for fraud or misrepresentation at the time of their issuance, and compromise any restructuring negotiations. He also said that such borrowing was never authorized by Parliament.

The IMF has repeatedly said, most recently during its September mission, that recognizing the $16.5 billion as state debt would “undermine debt sustainability,” damage public finances, and diminishes prospects of compensating depositors. The Fund insists Lebanon must pass a long-delayed ‘financial gap’ law, which would define how BDL’s losses are treated and clarify the State’s obligations. Without this law, the IMF says, no agreement can move forward.

The three positions converge in acknowledging the urgency of a solution and the need to safeguard depositors. All agree that the financial gap must be resolved in a way that does not collapse either the State or BDL. One potential compromise under discussion is for the State to inject capital into BDL, though details remain vague.