Finance in French Lebanon: A Complex Legacy

The period of French Mandate in Lebanon (1920-1943), often referred to as "Liban Français," significantly shaped the country's financial landscape, leaving a complex legacy that continues to influence Lebanon's economic realities today.

France's influence extended beyond politics and culture, deeply impacting the banking system, currency, and trade. A cornerstone of this influence was the Banque de Syrie et du Liban (BSL), a privately owned bank with close ties to French financial institutions. The BSL acted as the central bank, holding the exclusive right to issue currency, manage government accounts, and provide credit to the state. This arrangement gave France considerable leverage over Lebanon's economic policy, prioritizing French commercial interests.

The Lebanese pound (Lira) was pegged to the French franc, establishing a fixed exchange rate. This created a stable currency environment for trade with France and the Franc Zone. However, it also made Lebanon dependent on the French economy and vulnerable to fluctuations in the value of the franc. Fluctuations in the French franc would automatically affect the Lebanese economy, regardless of its own internal economic performance. This dependency laid the groundwork for future financial vulnerabilities.

French administrators encouraged a liberal economic policy, promoting free trade and a laissez-faire approach to business. This attracted foreign investment and fostered the development of a mercantile class. Beirut emerged as a regional hub for trade and finance, connecting the Middle East with Europe. Lebanese entrepreneurs capitalized on these opportunities, building businesses in commerce, transportation, and finance. However, this economic liberalization also led to uneven development, with wealth concentrated in the hands of a few and limited opportunities for those in rural areas.

The French Mandate also introduced modern banking practices and regulations. The BSL played a crucial role in establishing a network of commercial banks and promoting financial intermediation. However, the banking system remained largely oriented towards serving the interests of French businesses and the elite, with limited access to credit for small businesses and farmers.

While the French Mandate fostered economic growth and laid the foundation for a modern financial system, it also created lasting inequalities and vulnerabilities. The dependency on the French economy, the concentration of wealth, and the limited access to finance for the majority of the population continue to shape Lebanon's economic challenges. The legacy of "Liban Français" in finance is a complex mix of opportunities and constraints that Lebanon continues to grapple with in its pursuit of sustainable economic development.

The period established a pattern of close ties to external powers, particularly in finance, that would continue to characterize Lebanon's economic trajectory post-independence. Understanding this historical context is essential for comprehending the complexities of Lebanon's current financial crisis.