The Lebanese Banking Crisis

Abstract

This chapter traces the origins of the sector's prominence, shedding light on the factors that contributed to Lebanon's reputation as a regional financial center. It also examines the vulnerabilities that were disregarded during the period of expansion, establishing the foundation for future obstacles. Moreover, this chapter analyzes the sequence of economic and financial vulnerabilities that accumulated over time. The authors scrutinize the pivotal role that public debt played in exacerbating the crisis, investigating how unsustainable fiscal policies, currency pegs, and a lack of diversification made the economy susceptible to shocks. Lastly, the authors propose a roadmap for a set of measures that could mitigate the profound impact of the crisis and facilitate the recovery of the economy.