Lebanon Debate – Political Editor
On the surface, the financial scene in Lebanon appears reassuring. The dollar is available in the markets, and the reserves of the Bank of Lebanon continue to rise, while the stability of the exchange rate suggests that the country has passed the most dangerous stages of collapse. But behind this calm image, a more serious crisis is accumulating, which is almost invisible to the naked eye, which is that the economy is bleeding silently.
This “fake” stability prompted economics professor, Professor Jassim Ajaqa, to warn that what Lebanon is experiencing today is not an economic recovery, but rather merely fragile monetary stability based on circumstantial flows of dollars, at a time when structural imbalances in the balance of payments are worsening year after year.
Professor Ajaka says that focusing on the rise in the reserves of the Bank of Lebanon presents a misleading picture of reality, because it obscures the root of the problem, which is the chronic deficit in the current account. Lebanon still consumes much more foreign currency than it produces, and relies almost entirely on remittances from expatriates and tourism revenues to fill this gap, instead of securing it through production and export.
The numbers reveal the extent of this imbalance. According to Ajaqa, the value of imports during 2025 exceeded $21 billion, compared to exports that did not exceed $3.6 billion, raising the trade deficit to about $17.4 billion.
These numbers, according to Ajaqa, do not merely reflect an imbalance in the trade balance, but rather reveal an economic model based on import and consumption, in contrast to the weakness of the productive sectors capable of generating foreign currencies.
Despite this huge deficit, Lebanon did not witness a new collapse in the exchange rate, which is explained by the inability to expand the monetary economy outside the banking system, because since the collapse of the banking sector, expatriate remittances and tourism revenues have mostly entered the Lebanese market in cash, turning into the primary source of dollars in circulation.
Ajaka points out that the Bank of Lebanon was able to purchase part of this liquidity, which allowed it to increase its reserves and maintain a minimum level of monetary stability. However, he stresses that this model constitutes only a “temporary accommodation” that cannot be built upon.
Therefore, the monetary economy cannot be an alternative to reforms, according to Ajaqa, because it is entirely based on external financial flows that Lebanon has no ability to control. The security and regional developments that Lebanon has witnessed since the beginning of 2026 have proven the fragility of this model, after the decline in tourism and the disruption of air traffic were directly reflected in the volume of dollars entering the country.
On the other hand, the demand for foreign currencies remained high as a result of continued reliance on imports, especially energy imports, which means that any decline in external flows will quickly return pressure to the balance of payments, and then to the reserves of the Bank of Lebanon and the exchange rate.
The imbalance is not limited to the current account, as Ajaqa reveals, that it extends to the financial account as well, in light of the continued absence of direct foreign investments, and Lebanon’s disconnection from global financial markets since it stopped paying Eurobonds in 2020, which has deprived the economy of traditional sources of financing, and made it almost completely dependent on individuals’ remittances.
Ajaqa stresses that addressing the crisis is not through managing monetary policy only, but rather through changing the entire economic model, proposing to begin reducing unproductive imports by imposing temporary customs duties on luxury goods, in a way that reduces the depletion of foreign currencies, in parallel with launching industrial and agricultural policies that will restart the wheel of local production and reduce dependence on imports.
It also calls for directing a portion of expatriate remittances towards investment instead of consumption, through the creation of financing tools designated for productive projects, especially in the energy sector, which contributes to reducing the import bill and enhancing the economy’s ability to generate foreign currencies in a sustainable manner.
Ajaqa sounded the alarm, stressing that the decline in the real exchange rate gave Lebanon an opportunity to regain part of its competitive ability, but this opportunity will be lost if it is not accompanied by a comprehensive economic and reform vision, because the monetary economy based on remittances from expatriates may postpone the explosion, but it will not prevent its occurrence, because the structural imbalances in the balance of payments will re-impose themselves with the first external shock, and then the increase in the reserves of the Bank of Lebanon will not be sufficient to protect the Lebanese economy.
