The Banking Executive Magazine - February 2026 Issue 2

Lebanon Fiscal Gap Law Decoded THE FINANCIAL CRISIS IN LEBANON Lebanon’s financial crisis is one of the worst economic collapses in modern history, marked by a banking sector meltdown, a currency devalu- ation of more than 98%, and infla- tion that exceeded 220% in 2023. The crisis was triggered by years of unsustainable financial engineering by the central bank, compounded by political corruption, the COVID-19 pandemic, the 2020 Beirut port ex- plosion, and global shocks such as the war in Ukraine. As a result, de- positors were locked out of their sav- ings, public services collapsed to the point where households often re- ceive only an hour of electricity per day without private generators, and poverty levels soared, leaving much of the population dependent on re- mittances and humanitarian aid. LAW ECOSYSTEM The ecosystem around Lebanon’s Fiscal Gap Law (2025) involves the government, parliament, central bank (Banque du Liban), commercial banks, depositors, and international institutions like the IMF, all of whom play interconnected roles in shaping, contesting, and implementing the law. The Fiscal Gap Law ecosystem is a fragile balance of government re- form, banking resistance, depositor desperation, and IMF pressure. Its success depends on cooperation across these actors, but entrenched divisions make implementation highly uncertain. the BANKING EXECUTIVE 10 ISSUE 206 FEBRUARY 2026 MILESTONE Timeline & Milestones Cabinet Approval Parliamentary Debate IMF Negotiations Depositor Recovery Start Depositor Recovery Target Dec 2025 Early 2026 2026 onward 2026 2030 Draft law approved, sent to parliament. Amendments and approval uncertain. Law passage required for aid. Gradual payouts begin. 85% recovery pledged. TARGET DATE NOTES