Lebanon’s financial authorities and central bank are facing mounting pressure from shrinking foreign currency inflows, raising concerns over liquidity management, reserve depletion, and a renewed fiscal crisis if the country fails to reach a broader settlement to end ongoing conflict.

A senior banking official, speaking to Asharq Al-Awsat, said the contraction in dollar inflows is already creating “critical challenges” for monetary stability, as rising public spending collides with a steady erosion of foreign reserves and declining state revenues.

The official warned that Lebanon risks sliding back into a budget deficit, particularly if efforts to secure a comprehensive political and security agreement to end the war falter.

Rising pressure on spending priorities

According to the official, the challenge now facing policymakers lies in managing competing and urgent spending priorities that carry similar levels of importance and sensitivity.

These include humanitarian assistance for roughly one million displaced people, maintaining strategic reserves of essential goods such as wheat, medicines, and fuel, covering basic government expenditures, sustaining monthly payments to an estimated 400,000 bank depositors, and continuing salaries for public sector employees and military personnel.

The official said the absence of coordinated emergency planning has worsened the situation, criticizing what he described as official reluctance to adopt joint crisis-management mechanisms involving the government, the central bank, and the Ministry of Finance.

He also warned that continued military escalation and the fragility of the current ceasefire risk depriving Lebanon of its summer tourism season, which typically generates at least $5 billion in annual foreign currency inflows, even under unstable conditions.

“It is surprising that no economic emergency framework has been activated,” the official said, calling for the formation of a crisis task force to impose stricter controls on non-essential imports, sharply reduce public spending, and prioritize liquidity for depositors and salaries.

Parliamentary calls for emergency measures

The head of the parliamentary Economy Committee, MP Farid Boustany, echoed calls for urgent intervention, urging the declaration of a financial and banking state of emergency.

“The continued neglect of these issues is deepening the crisis for citizens,” he said. “Depositors in both foreign currency and Lebanese pounds are being left without protection, while financial reform laws remain frozen. Banks are still charging excessive fees on transactions, and the central bank must intervene immediately to regulate the situation.”

Central bank position

The source stressed that it is no longer sufficient for the central bank, in coordination with the government and the Ministry of Finance, to maintain strict control over the Lebanese pound money supply based solely on available dollar reserves, even if this has helped stabilize the exchange rate in relative terms.

In its official statements, however, the Banque du Liban maintains that the main risks to its foreign currency holdings stem from external geopolitical factors beyond its control, including regional security tensions.

External financing pressures

International credit rating agency Moody’s warned in a recent update that Lebanon’s balance of payments is likely to come under significant strain due to its heavy dependence on imports and rising global oil prices.

The agency said this pressure is only partially offset by tourism revenues and remittances from the Lebanese diaspora, both of which are declining due to the war and weaker economic activity in Gulf countries, where many expatriates are employed.

Moody’s said Lebanon will likely need alternative financing sources, including potential emergency assistance from the International Monetary Fund, to bolster liquidity and meet urgent humanitarian and social needs. It estimated that discussions are focused on a short-term package of around $1 billion, aimed at immediate financing needs while broader structural reforms are delayed.

Reserves under pressure

The central bank, for its part, rejected interpretations linking the decline in foreign currency assets to domestic policy decisions, insisting that it continues to manage reserves “with the highest levels of caution” to safeguard monetary stability and depositor interests.

It said recent fluctuations in reserves reflect exceptional geopolitical developments, as well as slower foreign currency inflows and reduced market intervention.

The Banque du Liban also pointed to valuation effects linked to global exchange rate movements — particularly fluctuations in the euro-dollar rate — stressing that these do not represent actual cash outflows.

Declining reserves and rising withdrawals

Official data shows Lebanon’s foreign currency reserves declined by $516 million over the past three months, a drop of about 4.5%, bringing total foreign assets to approximately $11.43 billion.

At the same time, cash withdrawals increased at the beginning of 2026 due to higher public sector spending and expanded withdrawal limits under circulars 158 and 166, placing additional pressure on liquidity.

According to central bank figures, partial repayment schemes for dollar deposits have expanded significantly. Withdrawals under Circular 158 — which allows $800 in cash and $200 via card — rose by 46% year-on-year. Meanwhile, withdrawals under Circular 166 — set at $400 cash and $100 via card — surged by nearly 200%, bringing the combined average increase to 71.2%.

The central bank said these mechanisms reflect efforts to manage deposit repayment in a controlled manner under constrained conditions, rather than a sign of policy failure.