Lebanon: can the government restore confidence in the banks?

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By: Aabla Jounaïdi Follow

It has been two weeks since Lebanon has set up a government called "technocrats to deal with the crisis, unprecedented since the civil war. Political crisis with demonstrators who since mid-October have been calling for an end to a system deemed to be corrupt. Economic and financial crisis described as "disaster" by the new Prime Minister Hassan Diab. Banks, which have become targets for protesters because of the many restrictions imposed, must regain the confidence of depositors.

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Establishments under attack. Others, invested in improvised sit-ins. It must be said that the patience of the Lebanese has been severely tested with endless expectations day after day to be able to withdraw a limited amount ... on average 200 dollars maximum per week, and the impossibility of transferring money abroad. Confidence is no longer really there. Faced with the shortage of dollars, the Lebanese imagine the worst . To restore lost confidence and avoid panic, the new government is working to better regulate the restrictions imposed by the banks, informal measures so far, unconstitutional even say the protesters.

What kind of measures could the authorities take?

The strategy that may be unveiled this week is being carried out jointly by the government and representatives of the banking sector. According to the local press, it would be a question of raising clearly the monthly limits of withdrawals in pounds, the national currency, but also the limits of transfers abroad which handicap so many Lebanese eager to send money to a relative outside the country. Restrictions which also handicap importers and businesses in general.

Several banks have been sued since November by injured customers.

The government should legitimize these measures by enshrining them in law. He hopes that this will be enough to stabilize the situation, marked in particular by large fluctuations in exchange rates. If the official rate has not changed, 1 dollar is now exchanged for more than 2000 pounds among money changers.

Lebanese Central Bank Governor also denounced climate conducive to undermining confidence

Questioned by our colleagues from France 24 last Thursday, Riad Salamé castigated rumors that target banks in Lebanon (at a weekly rate according to him).

However, this figure vilified by the demonstrators also recognized that to regain confidence, it was also necessary to establish more transparency. He assured that an in-depth investigation would be carried out to track down a billion dollars which have disappeared from Lebanese banks abroad since the start of the dispute. Information already revealed by the local press a few weeks ago.

Meanwhile, the Lebanese budget was voted on time, but under contested conditions, in the absence of many deputies which provoked the protest of the demonstrators. Proof that the distrust of the authorities is still there.

A budget, therefore, but this government's economic program has yet to be detected

It is a crisis government which has limited powers, as it is constrained by the political-denominational system in place. Will he appeal to the IMF and its austere revenues? No, replied the government, which nevertheless hosted a person in charge of the financial institution a few days ago.

Will the “ haircut ” solution feared by the demonstrators from the start be announced soon? It consists, it should be recalled, of puncturing deposits by converting dollar accounts into Lebanese pounds. It is inconceivable for the Lebanese who fear that the poorest will foot the bill. No trace for the moment of structural reforms to clean up finances, fight corruption, demanded by the demonstrators and the international community which conditions its support. The new head of government Hassan Diab asked his fellow citizens for time.

This banking crisis has repercussions beyond Lebanon

Neighboring Syria, whose financial system is embedded in the Lebanese circuit, is subjected to it head-on. Already heavily affected by the war, the Syrian pound has plummeted since the start of the banking crisis. Lebanon being the Syrians' primary gateway to greenbacks, especially since the introduction of sanctions against the Assad regime, sanctions that will harden again this year.

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• Lebanon
• finances
• Hassan Diab

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