by Cybele Atme

Since 2019, Lebanon’s financial crisis was taking the headlines of major newspapers. Lebanon has been cited to have suffered one of the worst financial crises in the world since the mid-1800s (Hubbard, 2021). Most articles attributed the crisis to what may be one of the biggest Ponzi-schemes[1] in the history of banking, involving the country’s central bank, Banque du Liban (BDL). This has sparked an interest in investigating the past decade of financial arrangements and political alliances involved in this nation-wide scheme and bringing criticism about the financial system in Lebanon for being managed by a group of corrupted financial elite – who were only concerned with securing their own interests. What has often been overlooked in this discussion, however, is a major historical fact: that Lebanon’s contemporary financial system has also been shaped by colonialism. Like many countries in the Global South, Lebanon was subject to colonial monetary restructuring during the French mandate before it was subject to economic restructuring programs by the International Monetary Fund. This is not to say that the financial elite are not to be blamed for draining the country of its resources. Rather, this blog post emphasizes what many historical analysists of the case of Lebanon have proven a long time ago: that the interests of the mercantilists are not always far off from foreign interests  (Ghosn, 2021; Safieddine, 2019).

Before elaborating on this point further, let us start with what exactly was the cause of the financial crash. For one, Lebanon’s economy heavily relies on capital inflows, mostly from the Gulf and the West in the form of capital, remittances, and even humanitarian assistance (Abdo et al., 2020). The Lebanese economy has a weak industry, and its economy mostly relies on the service sector. In 2019, manufacturing accounted for only 5.6% of the GDP, whereas agriculture was as low as 3%, and services accounted for 78.85% of the GDP (Daher, 2022, p. 10). Despite the lack of industry and resources for export, the Lebanese financial system managed to maintain the stability of its local currency (the Lebanese Lira) for decades, even during the civil war (1975-1990). To maintain the stability of the Lebanese Lira to the US dollar and pay for imported goods, the central bank BDL had to hold large amounts of US dollars.

The way in which the country managed to do so was by maintaining an artificial exchange rate of the Lebanese Lira to the US dollar. For years, Lebanon’s economic model relied mostly on attracting US dollars through the banking sector. This involved measures such as providing attractive interest rates on commercial bank loans to spark foreign investment in sectors such as real estate. These deposits were then funnelled to the central bank as commercial bank deposits. However, due to the political instability in the region starting in 2011, and the increasing financial restrictions, foreign financial flows began to diminish. In order to cover up the lack of US dollars, the BDL issued euro-dollar-bonds[2] (Rickards, 2020) and encouraged commercial banks to buy these bonds with attractive interest rates. Commercial banks would buy these bonds using the dollar-deposits from their clients, and BDL would repay the interest of these bonds by issuing new bonds with attractive rates. This classifies as a Ponzi-scheme, requiring a constant flow of new money to keep the system running. In 2019, a proposal to tax tobacco, gasoline, and mobile phone messages resulted in large-scale demonstrations that culminated into a revolution against the sectarian system. The continued demonstrations throughout 2019 were the final straw that ended the inflow of capital completely (Rickards, 2020). Once banking clients began to pull their dollar deposits out from the Lebanese bank accounts, the whole financial infrastructure collapsed, and commercial banks shut their doors.

           © Nina Abouzeid (2019)

To recap, we can conclude that the entire financial system in Lebanon was maintained by a false exchange rate which depended on private bank deposits. But not just any deposits, foreign-currency deposits, and more specifically dollar-deposits. If we take a step back, one may ask, how did this financial system come to be this way? Why is there no industry development? Why must it rely on foreign currency? An extensive and impressive archival study published in 2019 about the development of BDL conducted by Hicham Safieddine prior to the financial crisis answers some of these questions. Through Saffiedine’s historical analysis of BDL, he finds that Lebanon’s financial system has never been sovereign. Safieddine details the historical events that have shaped contemporary BDL, starting with the Ottoman and colonial empire, up to the presence of US hegemony. He finds that in addition to satisfying mercantilist interests, Lebanon’s financial system was heavily shaped by foreign interests. According to various post-colonial studies, colonial powers restructured colonized countries’ monetary regime to favour the colonial gains (Bernards, 2022; Helleiner, 2002; Safieddine, 2015).

In Lebanon, the French Mandate of 1919 included a monetary mandate that required Lebanon to have a central bank with a French governor, and that issued a local currency backed by Franc reserves. The entire monetary regime that was imposed by the French Mandate was currency-centred and the only beneficiary of this system was the French government. Monetary policies were motivated by high margins of profit. They provided minimal reserve ratio requirements, and economic statistical missions were only meant to infiltrate French capital rather than local development. Safieddine (2019) finds that “by 1932 close to half of the [central] banks holdings in deposits were siphoned off into investments abroad, namely in French government bills and securities” (p.69).

Even after the French Mandate, and with the birth of the Lebanese republic in 1943, the financial system was still heavily influenced by the French laissez-faire policies (Yassin, 2012). The sustenance of this model relied on the skills and know-how of the urban elite “and their long-standing relationship with the Western market system” (Yassin, 2012, p.68). Partly due to the sustenance of the post-colonial model, Lebanon was witnessing extreme social and sectarian inequalities by the 1970s (Daher, 2022). Regardless, after the fifteen-year civil war (1975-1990), BDL continued the legacy of colonialism by pegging the Lebanese Lira to the dollar. In an effort to rebuild the country, BDL continued to encourage an import-oriented economy, prioritizing international reserves rather than local industry-development. Being under the International Monetary Fund (IMF) program also entailed drastic neoliberal reforms which also strengthened international reserves, leaving Lebanon increasingly indebted (Youngblood Coleman, 2016).

The lack of financial sovereignty in Lebanon is not only a result of corrupted financial elite, but also a product of years of colonial and debt-dependency relations. There are patterns in the way in which the financial system in Lebanon functions that emerged during the colonial mandate. The financial system was shaped by the colonial restructuring which was meant to link the local economy to the French market. The dependence on foreign capital once was the francs and is now the US dollar. By identifying a financial system as post-colonial opens our eyes to how global inequality is continuously being reinforced by South-North dependency relations. Integrating a postcolonial approach to topics of corporate-state crime also has implications for criminological thought. It provides new perspectives regarding how present-day harms caused by the powerful may also be influenced by the legacy of colonialism, and how colonial power relations are cemented in post-colonial systems. In the case of Lebanon’s financial system, a post-colonial perspective makes clear that it is a story about systematic economic (neoliberal) dysfunction. Rather than merely being a story about individual greed or corrupt politicians and bankers.

[1] Definition of Ponzi Scheme according to the Merriam Webster dictionary: “an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risk” (Merriam Webster)

[2] A Eurobond is a debt instrument issued in a different currency than the home-country currency in which the debt in issued. A Dollar-euro bond is debt issued in US dollars (adapted definition from


Abdo, N., Abed, D., Aouad, N., & Ayoub, B. (2020). The IMF and Lebanon: The long road ahead – An assessment of how Lebanon’s economy may be stabilized while battling a triple crisis and recovering from a deadly blast.

Bernards, N. (2022). Colonial Financial Infrastructures and Kenya’s Uneven Fintech Boom. Antipode, 54(3), 708–728.

Daher, J. (2022). Lebanon : How the Post War ’ s Political Economy Led to the Current Economic and Social Crisis.

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Helleiner, E. (2002). The monetary dimensions of colonialism: Why did imperial powers create currency blocs? Geopolitics, 7(1), 5.

Hubbard, B. (2021). As Lebanon’s Crisis Deepens, Lines for Fuel Grow, and Food and Medicine Are Scarce. The New York Times.

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Safieddine, H. (2015). Economic sovereignty and the fetters of finance: The making of Lebanon’s central bank. In ProQuest Dissertations and Theses.

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Note: This blog post is an adaption of a presentation by the author at the SASE conference 2022

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Since 2019, Lebanon's financial crisis is taking the headlines of major newspapers. In this blog post, PhD candidate Cybele Atme outlines, in line with many historical analysis, how Lebanon's contemporary financial system has been shaped by colonialism and foreign interests.