Lebanon burns foreign reserves to hold pound steady in face of devastating war losses - analysis

Lebanon's currency has defied expectations, holding steady against the dollar near 89,500 pounds even as a devastating war depletes the nation's reserves and deepens economic uncertainty. Independent economic analysts, however, caution that this stability is artificially managed, not a result of genuine economic recovery.

The central bank, Banque du Liban, has maintained strict control over the Lebanese pound's liquidity. Simultaneously, the government has implemented stringent fiscal discipline, and banks and exchange channels face intense regulatory compliance pressure. These measures have temporarily averted another currency spiral but do not indicate a structural improvement in the economy.

The official peg of 1,507.5 pounds to the dollar, which once anchored the economy, is a relic of the past. Today, the parallel market rate of approximately 89,500 pounds to the dollar dictates daily life, influencing taxes, customs duties, salaries, corporate accounting, and cash transactions. The currency's current steadiness should not be mistaken for systemic healing; it merely shows that the immediate wartime panic has been contained while the underlying crisis remains unaddressed.

Finance Minister Yassine Jaber has publicly stated that Lebanon is better equipped to defend its currency this time, citing a tighter budget and unprecedented coordination between his ministry and the central bank. Official Finance Ministry documents show the 2026 state budget is projected at around $6 billion, an increase from the previous year, reflecting stronger tax collection, higher public fees, and elevated customs revenues. This effort aims to rebuild public finances after years of hyperinflation rendered state accounting nonsensical.

However, financial analysts point out that much of this fiscal improvement is due to the aggressive repricing of state assets in a dollarized reality. While the budget appears more coherent on paper, independent economists stress that Lebanon has not regained actual fiscal strength or revenue-generating capacity. The prolonged conflict poses a significant threat, potentially depleting this fragile fiscal cushion rapidly.