Lebanon needs balanced capital control measures between foreign reserves, depositors

The flag of Lebanon features the Lebanon cedar.
The flag of Lebanon features the Lebanon cedar.

by Dana Halawi

Lebanese economists agreed that the state needs to adopt fair and balanced capital control measures to protect both its dwindling foreign reserves and the interests of the depositors.

Earlier, a capital control draft law, which was supposed to be discussed by the Lebanese cabinet, was withdrawn because of the opposition by House Speaker Nabih Berri who said such measures are unfair to the depositors.

Banks have been pressing for such a law which would protect them against possible lawsuits by the depositors who currently cannot access their dollar accounts amid shortage in the U.S. currency in the country.

According to the draft law, the money that was deposited in banks before Oct. 17, 2019 can only be transferred to foreign countries in emergency cases and with an annual maximum of 50,000 dollars.

Mounir Rached, president of the Lebanese Economic Association, told Xinhua that the central bank can issue a circular imposing capital control measures only on people who aim to transfer their money without good reasons.

“People who have commitments outside Lebanon, such as mortgage payments, students’ tuition fees, imports and others, should be allowed to make free transfers,” Rached explained.

The shortage in foreign currency reserves in Lebanon has posed a tremendous problem to businesses and individuals who join the queue at local banks, only to withdraw as few as 100 dollars per week or withdraw their dollar deposits in the Lebanese pound at the rate of 1,500 pounds per dollar, while the dollar is sold at 2,800 pounds in the parallel market.

“This can be solved by allowing people to withdraw their U.S. dollars from banks in Lebanese pound at the rate of 2,800 pounds,” Rached said.

Nassib Ghobril, head of the economic research department at Byblos Bank, also emphasized the need for official capital control measures.

However, such “control measures should have been part of a comprehensive reform program adopted in conjunction with the IMF,” he said.

Adnan Rammal, representative of the trade sector in the Economic and Social Council, also called for fair capital control measures.

“Banks do not have the right to block depositors’ money or turn depositors into shareholders of banks after having used their money for years to finance the cabinet’s public debt in return for high interests,” he said. Enditem

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