The Daily Star (Lebanon)

De­posits will not be touched, of­fi­cials as­sure bank clients

Kanaan says law­mak­ers cut govt spend­ing by some LL1 tril­lion

- By Hus­sein Dakroub Business · Finance · European Politics · Middle East News · Latin America News · Politics · Banking · Beirut · Lebanon · World Bank · Banque du Liban · Saad Hariri · Nabih Berri · Lebanese Forces · Samir Geagea

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.

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