Lebanon’s economy is on the verge of collapse and everyone — Lebanese locals, expatriates, bankers, economists, politicians and even donors who have yet to come through with their pledges because they are waiting on economic reforms — knows it.

The banking sector’s steady decline is devastating because it was once one of the few reliable parts of Lebanon’s economy. Lebanon’s industrial and agricultural sectors, despite their high-quality products, have been unable to penetrate foreign markets but the country’s banking and services sectors often flourished, beginning in the 1950s and 1960s when Beirut was a haven for Arab oil money and foreign depositors. In times of stability, tourism in Lebanon also became a vibrant sector.

The Lebanese economy has faced problems because it relies too heavily on consumer-based structures. This aggravated the current crisis in which many Lebanese are unable to access money from their bank accounts because of capital restrictions.

The capital limits, imposed by banks that fear depositors will withdraw money all at once and cause a liquidity crisis, pushed people to desperate measures to try to withdraw money from their accounts. Some have crushed ATMs and bank facades; others took sleeping mattresses into bank lobbies and there were those who have taken to occupying tellers’ desks.

One depositor withdrew 6 million Lebanese pounds — more than $10,000 — in cash after he parked a bulldozer in front of the bank entrance and threatened to demolish the building if his request was not met.

The chaotic scene is broadcast live on social media, further eroding confidence in the banking system.

Melhem Khalaf, president of the Beirut Bar Association, slammed the capital control measures imposed by the Lebanese Banks Association as “unconstitutional and illegal.”

“This is a process that should be undertaken by the legislative authority,” he said in a statement. Some depositors have turned to the Lebanese judiciary with complaints and numerous courts have ruled in favour of depositors

Lebanese families dependent on expatriates working abroad and transferring money home to them are also growing concerned. It is estimated that almost 500,000 Lebanese are working in the Arab Gulf region, many regularly sending money to loved ones in Lebanon. If Lebanon’s cash and banking transfer system crashes, that source of income would be lost for many Lebanese households.

Indeed, fears are growing in Beirut that banks will go bankrupt. This was bolstered by a false rumour that Lebanon’s central bank Governor Riad Salame had fled to the United States. Salame’s office released a photo of him from his Beirut office to discredit the news that had spread on social media.

What is clear is that serious measures need to quickly be taken to help restore confidence. This begins with a trustworthy cabinet that would prioritise economic reforms. If the cabinet does not gain local and international support, Lebanon’s descent into chaos will take place even faster.

Going forward, it is clear that the vibrant and successful Lebanese banking sector that once attracted billions of dollars from inside and outside the country will not be the same and it will take a long time before the banking system will even be able to function as a pivotal part of the economy.

In the meantime, the Lebanese people will watch from the sidelines, as they are likely to grow poorer and poorer.