$41bn Gold Reserve Proposal Sparks Debate Over Exceptional Use

Lebanon's Banque du Liban has a law that prohibits the disposal of its gold reserves, except in cases where parliament passes a specific law. This law was enacted in 1986 to protect the gold during times of crisis, and it has survived civil war, reconstruction, sovereign default, and banking collapse.

The current debate surrounds proposals to sell some of the gold reserves to repay small depositors or use the funds for other purposes. Industry Minister Joe Issa El-Khoury suggested liquidating about $15bn of gold for bonds benefitting depositors with more than $100,000.

Banque du Liban Governor Karim Souaid has expressed opposition to selling the gold, stating that it should not be used to finance state projects or pay on behalf of the state or banks. However, he also noted that if the central bank faces an obligation it cannot meet and urgently needs to pay depositors, using some of the gold could be considered.