- 15:30
Lebanon does not need more cash-fueled dining tables, it needs a more formal economy that can curb illicit financing.
Lebanon finds itself in a paradox. While its broader economy is collapsing, the food-and-beverage (F&B) sector is showing surprising vitality. It may look like a feel-good tale of resilience, but in fact it reveals one of the greatest structural threats to Lebanon’s recovery: a cash-based economy that undermines transparency, fuels illicit flows, and deepens inequality.
So how did Lebanon go from a banking hub to a cash republic?Since the onset of the financial crisis in late 2019, Lebanon’s economic model has shifted radically. The World Bank reports a sharp fall in GDP per capita (down by more than 36% between 2019 and 2021) as the country dropped in classification fromupper-middle income to lower-middle income in 2022.
More striking: the World Bank estimates the size of Lebanon’s cash economy reached approximately US$ 9.9 billion in 2022, or nearly half of the country’s gross domestic product. In a country once celebrated as a regional banking hub, this tipping toward unregulated cash transactions is dramatic.
Why does this matter? Because a cash-dominated economy bypasses formal registration, taxation, banking oversight, and anti-money-laundering (AML) controls. It weakens the state’s capacity to collect revenue, to monitor systemic risk and to attract credible foreign investment.
Amid this broader collapse, Beirut’s cafés, bars and restaurants are seemingly rebounding. According to the consulting group Hodema, the number of F&B outlets in Beirut reached 810 by April 2024, representing about 83% of pre-crisis (2019) levels. Growth in high-end neighborhoods such as Mar Mikhael, Gemmayzeh, and Downtown, has been especially strong.
In other words, while the broader economy contracted severely, large portions of the F&B sector are operating at near-pre-crisis volume. That is good news, however, globally, F&B businesses are classified as “cash-intensive” sectors by AML authorities.Their characteristics—such as high transaction volumes, many small-value cash payments and flexible pricing—make them vulnerable to misuse.
The F&B boom in a cash economy therefore raises a question: is this only genuine business growth, or also the front for less-visible financial flows? When transactions occur in cash and are not recorded, tax authorities cannot trace the true turnover of businesses. The state loses revenue, while the informal economy grows. Given Lebanon’s near-terminal public finances—the country is saddled with public debt over 170% of GDP—this is not trivial.
With large volumes of economic activity outside the banking system and in physical dollars, the central bank loses both visibility and control. Credit, liquidity, and debt risks become harder to monitor. The longer this persists, the deeper the structural damage and the harder any potential recovery becomes. This further entrenches inequality and illicit flows.
In a cash economy, the insiders—those with access to hard currency, smuggling, or high-value trade—gain disproportionate advantages. The rest of the country, mostly paid in devalued Lebanese pounds, struggles to get by. The rising F&B scene creates islands of prosperity within a sea of decline, reinforcing social fragmentation.
Based on publicly available evidence, one cannot assert that any individual café or bar is a money-laundering front or a direct conduit for militia funding. Nonetheless, the broader pattern and risk environment are clear.
Lebanon’s inclusion on the Financial Action Task Force (FATF) “grey list” in late 2024 was driven in part by its increasingly cash-based economy, weak enforcement of anti-money-laundering and counter-financing of terrorism (AML/CFT) mechanisms, and its links to a prominent paramilitary group—Hezbollah.
Financial crime analysts note that cash economies increase the ease with which illicit flows, such as corruption, sanctions-busting, and smuggling, can be concealed and obscured. The very sectors showing growth—restaurants, cafés, and night-life—are internationally recognized as high-risk for misuse of fundsbecause of their cash intensity and plausible cover for legitimate business.
The booming F&B sector in Beirut is a structural risk factor as long as the current cash economy persists. When large volumes of cash flow through businesses that may not be fully audited or regulated, opportunities grow for illicit funds to be laundered orused for political patronage.
A warning sign emerged in recent weeks when Al-Jadeed TV and the Ministry of Health conducted a series of joint raids, exposing shocking hygiene violations inside restaurants, bakeries, and kitchens across the country. The televised reports revealed:
• Expired meat and poultry
• Rotten food stored in unsafe conditions
• Insects, mold, and contaminated surfaces
• Staff working without sanitary protocols
These are not isolated incidents; they are symptoms of a sector expanding much faster than the state can regulate. In a healthy economy, F&B growth is matched with strong inspections, licensing enforcement, and public-health compliance. But Lebanon’s cash-driven reality has produced rapid expansion accompanied by opaque ownership and minimal oversight. These factors create the perfect conditions for tax evasion, unregistered staff, informal kitchens and cutting corners on health and safety.
The public-health scandals exposed on national television reinforce the central point of this analysis: a cash economy does not just distort financial governance, it erodes every part of the state’s regulatory capacity, from anti-money-laundering to basic food safety.
A sector that cannot guarantee clean kitchens cannot be trusted to guarantee clean books. To protect both genuine entrepreneurs and national recovery, Lebanon must act on multiple fronts to rebuild trust in banking and restore formal intermediation. A credible bank resolution and deposit recovery plan are fundamental to bringing business activity back into the fold of the formal banking system.
Lebanon must also promote digital payments and reduce reliance on cash, while regulating fintech and mobile wallets to ensure they do not become informal channels like cash payments. Regulatory efforts should focus on cash-intensive sectors, especially F&B, real estate, high-value trade, and exchange houses—requiring thorough beneficial ownership disclosure, audited accounts, and point-of-sale monitoring.
The country’s exit from the FATF grey-list requires not just legal texts but consistent prosecutions, judicial independence, and full transparency. Lebanon must align tax reform with digital and formal-economy expansion, making it easier to register businesses, pay taxes electronically, and reduce incentives for off-the-books cash.
Walking through Beirut’s lively nightlife districts, it is tempting to see the scene as proof of revival. Lebanon does not need more cash-fueled dining tables; it needs a more formal economy—with restored trust in the banking system—that can curb illicit financing. Only then can the F&B sector support the country’s recovery rather than obscure its deeper crisis.
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