Since the onset of Lebanon’s banking crisis and the subsequent freezing of depositors’ funds, public trust in the banking sector has collapsed. As a result, many Lebanese have opted to hoard their savings at home, with the total amount now estimated in the billions of dollars.

According to economic and political researcher Chadi Nachabe, the value of currency stockpiled in Lebanese households has reached an estimated $10 billion. This unprecedented accumulation of cash is the direct result of the 2019 banking meltdown, when depositors saw their savings trapped in a paralyzed financial system.

“Hoarding this amount of money at home is harmful to the Lebanese economy,” Nachabe said. “These funds are supposed to be deposited in banks, which in turn finance economic sectors and help stimulate economic activity. “These funds should be circulating through the banking system, which is meant to support economic sectors and help revive activity. But banks have been reduced to the role of money changers and are no longer playing their intended role as the economic backbone.”

Since the crisis began, Lebanese banks have imposed de facto capital controls, severely restricting access to deposits. As confidence in the sector evaporated, many citizens opted to withdraw whatever cash they could and keep it at home.

In addition to stalling economic recovery, Nachabe warned that cash hoarding has made people vulnerable to fraud through bogus trading companies.

“Lebanese citizens have been defrauded by fictitious investment firms that promised returns but instead siphoned off their savings, leading to further economic losses,” he said. “It’s a second wave of theft following the loss of access to their bank deposits.”

Storing large sums of money at home also presents security dangers. Nachabe pointed to a surge in burglaries targeting residential properties, many of which are believed to be linked to the growing trend of cash hoarding.

“Thousands of thefts have occurred. Storing large amounts of cash at home carries both financial and security risks,” he said.

Asked what must be done to reintegrate this frozen capital into the formal economy, Nachabe said the first and foremost requirement is political and financial stability.

Next comes the restructuring of the banking sector, he continued, alongside rebuilding public confidence in financial institutions. He called for a comprehensive economic strategy developed by the Ministries of Finance and Economy, in cooperation with the country’s Chambers of Commerce and Industry, to clearly define the future role of banks in financing the economy and reviving growth.”

He emphasized the need for a combined effort involving banking sector overhaul, a deal with the International Monetary Fund, the implementation of structural reforms, the return of political stability, and Lebanon’s reintegration into the Arab fold.

According to Nachabe, only through such a multi-pronged approach can the Lebanese people begin to trust the system again and feel secure enough to return their money to the banks.

“Restoring confidence in Lebanon’s economy and institutions is the only way to bring this cash back into the system,” he concluded. “It’s the key to jumpstarting recovery and rebuilding the country’s economic foundation.”