Lebanon’s financial system has remained remarkably stable despite the ongoing war, thanks to the measures implemented by the central bank, Banque du Liban (BDL). While the conflict initially placed significant pressure on the financial sector, particularly during the first two weeks of October, conditions have largely returned to near-normal levels, Nidaa Al-Watan reported, citing banking sources. 

However, statements from the Ministry of Finance suggest the government is exploring ways to fund reconstruction efforts or compensate affected citizens, potentially through increased taxes. 

Despite the war's devastating impact, Lebanon’s monetary situation remains under control. This comes even as BDL's foreign reserves have declined significantly in recent weeks. In the second half of October, reserves fell by approximately $92 million, following an earlier decline of $344 million earlier in the month. In total, the central bank spent $436 million in October—a month that marked the transition from limited skirmishes to all-out war. 

The largest portion of these funds was allocated to depositors, who received five installments as part of BDL’s Circulars 158 and 161. Additionally, the central bank provided public sector salaries in U.S. dollars, a critical measure to help citizens cope with deteriorating living conditions. 

As of mid-November, BDL’s reserves stood at $10.26 billion, an increase of $1.6 billion compared to levels before former governor Riad Salameh’s departure. Banking sources anticipate that BDL’s upcoming biweekly financial statement will reflect slight improvements, signaling a gradual recovery. 

According to central bank officials, the initial shock of the war, which began in earnest on September 17, caused significant market disruptions. These pressures were exacerbated by the limited availability of Lebanese lira in circulation—estimated at approximately 50 trillion lira ($560 million)—which prevented major destabilization of the currency. 

The psychological impact on citizens, following the intensity of Israeli attacks, also played a role in market fluctuations. However, central bank sources emphasized that these effects were minor and did not reach the level of a "severe threat." 

By mid-November, the demand for the Lebanese lira had recovered to approximately 80% of pre-September levels, with sources describing this as a "positive sign" for economic stability. The improvement in tax collection, particularly by the Ministry of Finance, has further bolstered confidence. BDL plans to gradually recoup the dollars spent in October as the economic situation stabilizes. 

Economic activity has declined by approximately 40% over the past two months, but revenue generation remains relatively robust given the war's circumstances. This underscores a cautious return to financial normalcy, albeit with lingering uncertainties. 

The Finance Ministry’s recent remarks have sparked speculation that the government may introduce new taxes to cover reconstruction costs or provide compensation to those affected by the war. This could be included in the 2025 budget, which is expected to undergo significant revisions post-conflict.

Critics warn that such measures might be an attempt by the political establishment to deflect blame and avoid addressing deeper economic issues. Before the financial crisis, Lebanon's budget was around $17 billion—equivalent to 30% of the economy, valued at $54 billion. The 2024 budget, however, is just $3.2 billion, or 15% of GDP. Adding the financial burdens of war to an already struggling economy or central bank could precipitate another crisis. 

Central bank officials stress that BDL is in no position to fund reconstruction, estimated to cost tens of billions of dollars.

"The central bank cannot provide a single dollar for reconstruction—it would be giving what it does not have," a source told Nidaa Al-Watan.

Instead, they urged the government to engage with the international community for financial assistance.