As for diaspora remittances, the BDL report also brings bad news. In 2020, Lebanese expatriates sent a total of $6.3 billion, whereas in 2018 and 2019, they had sent $7 billion and $7.41 billion respectively.
Beyond the macroeconomic data, three main problems appear when digging deeper into the BDL’s annual report.
The first problem deals with the most devilish mineral of all, gold.
Where Is the Gold?
In 1986, parliament passed Law no. 42 banning the use of BDL’s gold reserves under any circumstances, barring parliament passing a law to expressly authorize it — which it never passed.
Protecting the BDL’s gold is the stuff of lore. Former BDL governor Edmond Naim (who served between 1985-1991) is reported to have moved into BDL in 1987, in order to physically and symbolically protect the gold reserves from being snatched by warring militias.
But how much gold does BDL have today?
In December 2020, one of the BDL vice-governors informed parliament that the last time the central bank’s gold reserves were counted was in 1996, and that based on his estimates, 60 percent of these reserves remained in Lebanon while the rest were in the United States. The World Gold Council, a global lobbying group composed of the world’s major gold mining companies, estimates that in 2020, the BDL’s gold reserves were worth $17.4 billion.
In its 2020 annual report, the BDL does not specify the total amount of gold it holds. Instead, it states that its total external reserves, which include gold, stood at $9.41 billion. Interestingly, on July 22, the National Gazette published a correction attributed to a typographical error: the BDL does not have $9.41 billion in total external reserves — it has $41.9 billion.
How much gold is actually held is an extremely important question in the context of economic and financial collapse. Reserves could theoretically be used to usher in an economic recovery if used to support productive sectors of the economy, to ensure basic social protections and social services to the population, and to upgrade Lebanon’s dilapidated infrastructure.
Recently, Mouwatinoun wa Mouwatinat fi Dawla (“Citizens in a State,” abbreviated MMFD), one of the new anti-establishment political parties, launched a campaign cleverly titled “mustaqbalak dhahab,” which can simultaneously mean “your future is gold” or “your future is gone.” The campaign sought to raise awareness about what could be productively done with the gold reserves, but also to warn citizens that the gold could very well end up being used by the political class to continue the subsidization policy that started in 2020 and simply buy more time for the unsustainable status quo. As some members of the ruling class openly call for selling off Lebanon’s gold reserves, knowing how much gold Lebanon actually has and how these reserves are to be used is of the utmost importance.
But what exactly are the subsidies? And where do they prefigure in the BDL annual report?
Mouwatinoun wa Mouwatinat fi Dawla, one of the new anti-establishment political parties, launched a campaign cleverly titled “mustaqbalak dhahab,” which can simultaneously mean “your future is gold’” or “your future is gone.”
Why Don’t We Know More About the Subsidies?
In May 2020, the Ministry of Economy and Trade issued a policy to subsidize a wide range of imported goods it deemed essential. The policy would allow local companies to import select goods at the official rate of L.L. 1,507.5, or at the L.L. 3,900 rate to the dollar. At a time when the Lebanese Lira was devaluating, BDL would use its foreign currency reserves to cover the difference.
The annual report notes that BDL used $5 billion to subsidize the import of basic commodities: medicines, fuel, and wheat. Yet, the BDL depleted more than double that amount from its foreign currency reserves in 2020 (Figure 5). The annual report is vague on how the additional $7.8 billion were depleted, and completely silent on money transfers abroad by big depositors.