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“Banking on the State: The Financial Foundations of Lebanon” by Hicham Safieddine is a captivating journey through Lebanon’s financial past and its impact on the formation of the state. This book is more than just a historical narrative, it’s a forward-looking examination of the country’s financial bedrock.
Safieddine charts the course of Lebanese banking from its roots in the Ottoman era, through the Mandate period, to the birth of independent Lebanon, and the establishment of Banque du Liban (BDL), its central bank. He uncovers the deep ties between the banking community and the very idea of Lebanon as a state.
The author cautions that the inherent “mercantile-financial interests” make the Lebanese banking system prone to financial risk. A privileged group of bankers has been reaping benefits from an exchange rate pegged to the dollar since 1997. They exchanged dollars for Lebanese pounds and loaned them to the state at interest rates higher than what their dollars could yield. This practice, known as “Banking on the State”, became untenable when remittances and Gulf petro-dollars could no longer fuel the pyramid scheme.
Safieddine contends that the Lebanese bankers’ myopic laissez-faire approach led them in 1948 to prolong the privilege of the Banque de Syrie et Liban (BSL) to mint Lebanese currency. This decision led to an overpriced Lebanese lira to stimulate French imports and foreshadowed the dissolution of the Syrian-Lebanese customs union in 1949.
The book discloses how Lebanon’s financial underpinnings were molded by the history of the standardization of economic practices and financial systems within the decolonizing world. The central banking system that arose was driven more by political power and financial gain than by market dynamics, national interest, or economic sovereignty.
In summary, “Banking on the State” offers a comprehensive insight into the intricate dance of private finance, public policy, and international influences that shaped the development of state institutions in Lebanon. It acts as a timely alert to the potential risks and hurdles confronting the Lebanese banking system.
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Books mentioned in the article: “Banking on the State: The Financial Foundations of Lebanon” by Hicham Safieddine
