The Daily Star (Lebanon)
Deposits will not be touched, officials assure bank clients
Kanaan says lawmakers cut govt spending by some LL1 trillion
BEIRUT: For the second day in a row, Lebanese officials Friday sought to reassure worried depositors that their savings in banks were secure and would not be touched after banks imposed informal capital controls amid a dollar liquidity crunch.
Finance Minister Ghazi Wazni also urged banks to cut interest rates in the new government’s latest bid to stimulate the stagnant economy, which is saddled with a soaring national debt of over $88 billion, endemic budget deficit and slow growth.
The banking and monetary situation in the country and the role of Lebanese banks in boosting economic stability were discussed Friday at a meeting between Wazni and a delegation from the Association of Banks in Lebanon.
During the meeting, Wazni stressed that “bank deposits should not be touched and he urged the Association of Banks to work to cut the interest rates in the coming period in order to stimulate the economy and reduce the burdens on public finances,” the state-run National News Agency reported.
ABL head Salim Sfeir described the meeting with Wazni as “very positive,” saying they exchanged information with the finance minister on dealing with the financial crisis. “But no decision was taken,” he said.
Asked about the fate of citizens’ deposits in banks, Sfeir said: “There are no confiscated deposits. They are in banks.” Sfeir also dispelled fears of a haircut on deposits. “There is no haircut,” he said.
Asked about possible mergers of some small banks to avoid bankruptcy, Sfeir said: “No decision has been made. We only discussed ideas.” Sfeir later said in a tweet that banks would work to reduce interest rates.
Banque du Liban Gov. Riad Salameh Thursday reassured depositors, saying they would not lose their savings in banks and the Lebanese pound’s official dollar peg would remain at LL1,500. The pound’s exchange rate hit LL2,500 to the dollar on the black market earlier this month. Salameh also said Lebanon could “restart” with help from the international and Arab community.
The ABL and commercial banks, as well as the Central Bank, have been repeatedly targeted by anti-government protesters in past weeks who blame them for the worsening economic and financial crisis. Several banks in central Beirut and other areas were ransacked and set on fire by protesters as part of their unprecedented popular uprising that began on Oct. 17 against the entrenched political class they deem as corrupt and incompetent.
Protesters have accused bankers of complicity with the ruling political
elite and suspect politicians of transferring funds abroad despite the restrictions and a prolonged local bank closure when protests first broke out.
In a measure designed to reassure worried depositors after banks imposed informal capital controls amid a dollar liquidity crisis, Lebanese banks have agreed, in coordination with the Central Bank, to ease some restrictions on Lebanese pound withdrawals.
Wazni, who has an overwhelming task of cutting the huge budget deficit and securing soft loans to finance the purchase of basic import needs, has been holding talks with Lebanese economic and business leaders, as well officials from the International Monetary Funds and the World Bank to explore new ideas for the next phase.
Parliament Monday approved the 2020 state budget that aims to slash deficit to some 7 percent of GDP. But many experts and economists insisted that this bill was not sufficient to attract urgently needed financial aid from international donors to the crisis-hit, cash-strapped country.
MP Ibrahim Kanaan, head of Parliament’s Budget and Finance Committee, said the lawmakers had cut government spending by some LL1 trillion.
The Cabinet of former Prime Minister Saad Hariri had promised a deficit of just 0.6 percent for 2020, but Kanaan said that was now impossible as the economic crisis had caused projected revenues for the year to drop.
Last week, Wazni told The Daily Star one of the priorities of the Cabinet was to secure between $4 billion and $5 billion in soft loans from the international community to finance the purchase of wheat, medications and fuel oil.
Prime Minister Hassan Diab’s 20-member government, which has still to win a vote of confidence from Parliament, is facing one of the worst economic and financial crises since the end of the 1975-90 Civil War. The crisis has also shaken confidence in banks, which have imposed tight restrictions on cash withdrawals and transfers overseas, and raised concerns over the country’s ability to repay its huge debt.
Speaking during a meeting Friday at the Grand Serail with a delegation from the Economic Committees, the country’s private sector, Diab said a solution to the economic crisis was not difficult.
“The economic situation in the country and in all sectors is suffering from difficulties. But we must endure a bit in the hope that the government will be able to make an achievement that leads to emerging from the crisis Lebanon is experiencing,” Diab said in his remarks that were carried by the NNA.
He said he was aware business and economic establishments were facing “big challenges” due to the deepening crisis that led to the shutdown of hundreds of firms, stores and restaurants and the layoffs of thousands of people.
Addressing the business leaders, Diab said: “I know you are keen on the country. That’s why I hope that you will go on despite the difficulties because solutions are not difficult. Inshallah, we will be able to change the downward path in order to restore the economic cycle.”
Diab Friday evening chaired a meeting of the ministerial committee charged with drafting the government’s policy statement at the Grand Serail. This was the seventh meeting held by the committee since Diab formed his Cabinet last week to finalize the policy statement on whose basis the government will seek a vote of confidence from Parliament. Another meeting is lated for Saturday.
An official source told The Daily Star Thursday that an “economic salvation plan” would be the core of the government’s policy statement. The source expected the draft policy statement to be finalized over the weekend and to be endorsed by the Cabinet early next week.
Once endorsed by the Cabinet, copies of the policy statement would be sent to MPs and Speaker Nabih Berri who would then convene Parliament to debate the policy statement before a vote of confidence on the government is held.
Lebanese Forces leader Samir Geagea weighed in on the banking crisis by defending the depositors’ savings. “It is unacceptable to touch the people’s deposits in banks. The Strong Republic bloc is entirely against it,” Geagea said in a statement after chairing a meeting of the LF’s parliamentary Strong Republic bloc at his residence in Maarab, north of Beirut.
He called on the new government to adopt an “integrated package” to deal with the financial crisis. “Irrespective of the government’s decision, we call for safeguarding the people’s deposits in banks,” Geagea said.